Court decision26 Aug 2020 23:30
From the judgment on 28/7/20:
The sale of iron ore does not violate the terms of the judicial recovery plan, but seeks to respect how much has been agreed and not yet implemented due to the Union's own delay in resolving its internal conflict and come to a successful conclusion in the negotiation with the recoveree. The impasse in the negotiation has the practical effect of harming the collectivity of creditors and other interested parties in the resumption of the reorganization's activities, requiring cautious but essential judicial action. In this line, the embargoed decision does not remove from the Union the status of fiduciary creditor, does not empty its guarantee or place it in a situation of vulnerability to renegotiate the form of satisfaction of its credit. It only allows the sale of iron ore, taking advantage of the high price in international trade, to support the payment of labor and low-income creditors, an imposing measure in view of the impasse in the negotiations. The proceeds from the sale will be deposited in a judicial account and released under the supervision of the Judicial Administrator, for the satisfaction of the aforementioned creditors and for the operational expenses of the recoveree. In addition, all cautions mentioned by the Judicial Administrator 17.231 / 17.232 must be observed, which satisfactorily serve the interests of the Banking Union and other creditors. For this reason, I maintain the sale authorization, with the aforementioned precautions, providing for embargoes in that part.
Basically, the court seems to have become annoyed with the bank creditors dragging their feet and therefore ordered that the sale could go ahead with the compromise being the sale proceeds had to be paid into a court controlled account. Clearly the bank creditors are unhappy about that as they are saying they have, as term of the original loan of $135m (in 2013), security over all the iron ore, i.e. INCLUDING the stockpiled ore at the port. As such, that can only be sold if they have authorised it (which they haven't) and that the sale has the effect of ignoring their security over the iron ore ("emptying the chattel mortgage"). In effect, the banks want to have control of any sale and the resulting sale proceeds. Hence in the latest court ruling:
that defendant Zamin disposes of iron ore to third parties immediately, significantly emptying the asset subject to the chattel mortgage. In the alternative, they ask for the acknowledgment, also preliminarily, that the limit of US $ 10,000,000.00 (ten million US dollars), established by the hostile decision, refers to the gross sale value of iron ore. They advocate, in the end, for the provision of the appeal, reforming the r. decision aggravated, removing the authorization for any disposal of iron ore "which is not expressly authorized by AF Minério de Ferro and which does not have prior and express authorization by the Creditors Union".
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