Mirabela Nickel misses Oct. 15 interest payment on 8¾% unsecured notes

By Caroline Salls

Pittsburgh, Oct. 23 - Mirabela Nickel Ltd. did not make the interest payment due Oct. 15 on its $395 million of 8¾% senior unsecured notes due 2018, according to a news release.

The company has 30 days to make the payment before an event of default is triggered under the notes indenture.

In response to recent press articles, Mirabela said it is in full compliance with its continuous disclosure obligations and will continue to comply with those obligations.

In addition, the company said Standard & Poor's lowered its corporate credit rating to selective default (SD) from CCC+ after Mirabela missed the interest payment. S&P also lowered the issue credit rating on the notes to D from CCC+ and removed the ratings from CreditWatch negative, where they were placed on Oct. 2.

"At this stage, we are uncertain about Mirabela's willingness to make the payment within the grace period, although we believe that it currently has sufficient cash to meet that obligation," S&P said in a release.

"The company had about $80 million of cash at the end of August 2013."

S&P said Mirabela announced on Sept. 27 that one of its two offtakers, Votorantim Metais Niquel SA, served notice to the company of its intention to terminate its offtake agreement at the end of November. The agreement was previously scheduled to expire at the end of 2014.

Since Mirabela has a $50 million loan from Banco Bradesco SA that is secured on the Votorantim receivables, S&P said termination of the offtake agreement could lead to a default under the Bradesco loan which, if not remedied, could lead to a cross default under the $395 million of notes.

The ratings agency said that Mirabela announced on Oct. 18 that the termination notice served by Votorantim was invalid and that Votorantim would honor its obligations as originally planned. However, Mirabela said it expects Votorantim to purchase only a small proportion of mine output.

S&P said this announcement would indicate that the likelihood of an immediate default under the Bradesco loan and potential subsequent cross default under the notes had reduced, despite the subsequent announcement that the Oct. 15 interest payment was not made.

S&P said it expects to lower the company's corporate credit rating to D if the interest payment is not made by Nov. 15.

Mirabela is a nickel producer located in Perth, Western Australia.

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