Brazil’s pellet producer Samarco, a 50/50 JV between BHP Billiton and Vale, could run out of cash at any point between Q3 and Q4 this year, credit rating agency Fitch said on Monday, while downgrading both the company’s national and global long-term issuer default ratings (IDRs) to C, from CCC.
According to Fitch, the downgrade reflects the agency’s expectations that Samarco won’t restart its operations until H2 2017, as opposed to a H1 2017 estimate released previously by the credit rating agency.
Fitch added the downgrade is also due to the political sentiment that weighs on Samarco as well as to its incapacity to obtain the needed licenses in order to operate.
Fitch said Samarco could be forced to reach a standstill agreement to restructure its debts “in the coming months,” so it could keep some money at its accounts, which could then be used to pay for those operating licenses.
“Government authorities are unlikely to let [Samarco] use blocked money by authorities, which would partially mitigate the pressure over the company’s cash flow,” it noted.
Fitch’s downgrade follows another downgrade by S&P in the company’s credit ratings, as the company’s outlook and financial metrics deteriorate.