Moody’s cuts Samarco, notes to Caa2

Moody's Investors Service said it downgraded the corporate family rating of Samarco Mineracao SA and the ratings of its senior unsecured notes due 2022, 2023 and 2024 to Caa2 from Caa1.

The outlook remains negative.

Moody’s said the downgrade to Caa2 reflects mainly the continued uncertainty about Samarco's ability to resume operations and, therefore, concerns over liquidity pressures, as resources available to meet its financial obligations diminish overtime. In the absence of cash generation, the company´s cash position of $711 million as of June 2015 is tight to meet with its financial obligations as well as capex, costs and operating expenses, including payment of suppliers, wages, and taxes.

The agency estimates that, combined with the R$2 billion 2016 portion of the remediation agreement signed with Brazil's government on March 2 (at least 50% of it already disbursed for remediation efforts and penalties), total outflows may reach over R$2 billion in the year.

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