Fitch: Cash Flow Assumptions for Samarco - Path to Recovery

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings believes that Samarco Mineracao S.A.'s (Samarco, foreign currency [FC] IDR 'BB-'/Rating Watch Negative) recent agreement with its shareholders, the Brazilian federal government and authorities from the states of Minas Gerais and Espirito Santo, increases the probability that the company will be able to obtain its operating licenses and eventually be able to restart operations by late 2016. Samarco is jointly controlled, on a 50/50 basis, by Vale S.A. (Vale, FC IDR 'BBB'/ Negative Outlook), BHP Billiton Ltd./Plc (BHPB, long-term IDR A+/Negative).

Following the announcement last week, Fitch affirmed Samarco's IDRs and senior unsecured ratings at 'BB-' and revised the Rating Watch to Negative from Evolving. Failure to obtain the necessary operating licenses within the next three to six months will result in Samarco's rating being downgraded multi-notches absent significant shareholder support.

"Fitch's base case incorporates the need for Samarco to raise USD600 million from its shareholders or with working capital loans in the next 2 years in order to meet its obligations and maintain a minimum cash balance of USD100 million", said Jay Djemal, Director at Fitch Ratings.

The agreement covers remediation, mitigation and compensation for damages that resulted from the Fundaao dam accident. Vale and BHPB have guaranteed funding for the foundation to be created as part of the agreement.

For more information, a special report titled "Samarco - Path to Recovery" is available on the Fitch Ratings web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Samarco - Path to Recovery (Fitch's Cash Flow Assumptions)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878552

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160309006429/en/

Fitch Ratings
Jay Djemal, +1-312-368-3134
Director
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Secondary Analyst
Debora Jalles, +1-312-606-2338
Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
[email protected]

Source: Fitch Ratings

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