Fitch 10 Most Distressed LatAm Corps: Multi-Notch Downgrade if Samarco’s Global Agreement Collapses
Fitch Ratings-New York-01 February 2016: Today Fitch Ratings launches its 10 report series covering Latin America’s most distressed corporate credits with Samarco. One report will be released each day through Feb. 12 per the schedule found at the end of this release.
“The collapse of Samarco’s discussions with authorities to reach a broad agreement would complicate its ability to resume operations in a timely manner, resulting in a multi-notch downgrade and making default likely,” said Jay Djemal, Director at Fitch Ratings.
Motivation remains high for all parties to agree to a deal that provides Samarco with a manageable path to recovery, although it’s possible that one or more participating groups may not agree to the first proposed settlement.
The reputational risk to shareholders combined with Samarco’s high profitability, unaffected assets, future dividends and economic importance to Brazil, remain strong incentivizing factors to an agreement.
Fitch believes the likely outcome of the agreement will be ongoing extraordinary payments by Samarco. Government sources have cited a total sum of BRL20 billion over a period of 10 years or more.
Fitch’s 10 Most Distressed LatAm Corporates series will be released one report per day as follows:
Feb. 1: Samarco Mineracao S.A.
Feb. 2: Companhia Siderurgica Nacional (CSN)
Feb. 3: Pacific Exploration and Production Corporation
Feb. 4: GOL Linhas Aeresas S.A.
Feb. 5: Oi S.A.
Feb. 8: GeoPark Latin America Limited Agencia en Chile
Feb. 9: Ajecorp B.V.
Feb. 10: TV Azteca, S.A.B. de C.V.
Feb. 11: QGOG Constellation S.A.
Feb. 12: Odebrecht Offshore Drilling Finance Ltd.
For more information, a special report titled “Samarco – Binary Outcome” is available on the Fitch Ratings web site at www.fitchratings.com.