DBRS Assigns BBB (high) Rating with Stable Trend to Vale New Guaranteed Notes

DBRS has assigned a rating of BBB (high), with a Stable trend, to Vale Overseas Limited’s (Vale Overseas) new issue of $1 billion guaranteed notes maturing September 2019 and bearing a coupon of 5.625% (the Guaranteed Notes). The Guaranteed Notes will be guaranteed by Vale S.A. (Vale or the Company). Vale intends to use the proceeds for general corporate purposes.

The Guaranteed Notes are general obligations of Vale Overseas, a wholly-owned finance subsidiary of Vale, and are not secured by any collateral. The rights of holders of the Guaranteed Notes will be junior to the rights of secured creditors of Vale Overseas to the extent of their interest in its assets and will rank equally with the rights of creditors under all of Vale Overseas’ other unsecured and unsubordinated debt.

Vale will irrevocably and unconditionally guarantee the full and punctual payment of principal, interest, additional amounts and all other amounts that may become due and payable in respect of the Guaranteed Notes. The guaranty will be a general obligation of Vale and is not secured by any collateral. The rights of holders of the Guaranteed Notes to payments under the Vale guarantee will be: (1) junior to the rights of secured creditors of Vale to the extent of their interest in Vale’s assets; (2) equal with the rights of creditors under all of Vale’s other unsecured and unsubordinated debt; and (3) effectively subordinated to the rights of any creditor of a subsidiary of Vale over the assets of that subsidiary.

Vale Overseas may redeem the Guaranteed Notes, in whole at any time or in part from time to time, at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed and a “make whole” amount plus, in each case, accrued and unpaid interest on such notes to the date of redemption. Vale indicates application will be made to list the Guaranteed Notes on the New York Stock Exchange

Vale is one of the largest diversified mining companies in the world and is the world’s largest producer of iron ore and the second largest producer of nickel. Vale’s large reserve base and low production costs underpin a strong business profile. DBRS expects that Vale’s strong business profile and solid financial metrics will allow it to withstand the current downturn in commodity prices while maintaining a number of growth projects, albeit on an extended development schedule.

Vale has been weathering the economic downturn by reducing production where required, cutting capital expenditures, deferring some growth plans, focusing on efficiencies and cost reduction and introducing innovations into its production and product delivery processes. Over the long term, DBRS believes that Vale should benefit from economic recovery and a growing demand for minerals as growth in lesser developed countries continues.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.