Brazillian Telecom Oi SA Submits a New Bankruptcy Plan

by San Antonio Attorney

In a bid to exit bankruptcy protection, struggling Brazilian telecom Oi SA presented a new recovery plan on Monday, but insiders say a successful agreement with creditors may still be far from happening.

Under the new plan, Oi is offering international bondholders a 70% cut, where eligible bondholders will get new debt valued at around 30% of what they are owed.   Bonds not redeemed in 3 years may then be converted to equity in up to 85% of the company’s capital.   The proposal also details the company’s plans to look for fresh capital and sell several assets, including real estate and the company’s mobile unit.

However, many shareholders disagree with the plan to sell the potentially lucrative mobile unit.   And because Oi has not discussed the plan’s terms with bondholders who may reject it outright, insiders say that this recovery plan may serve as nothing more than a placeholder filed just to meet a court-imposed deadline.   Businessman and active shareholder Nelson Tanure seeks to enlist the local think-tank Fundação Getulio Vargas in redesigning a new recovery plan for Oi, but it’s not clear if Pharol SGPS, Oi’s largest shareholder with 22.24% of shares, or investment bank Moelis &Co, responsible for advising 40% of bondholders, will agree.

The Rio de Janeiro-based company, once poised to become a national champ and global telco player, filed the largest bankruptcy protection request in Brazil´s history last June, listing a total of 65.4 billion reais ($19.7 billion) in debt, including 15.4 billion reais in tax and other regulatory charges.

An apparent lack of resources to compete with international players, low penetration and market shares in the country’s booming broadband and mobile market, along with a series of expensive mergers with Brasil Telecom and Portugal Telecom, contributed to draining the company’s assets.

Oi SA sought bankruptcy protection after negotiations between shareholders and creditors fell through.  Pharol SGPS refused a deal that would hand over company control to bondholders by swapping debt for equity, thus reducing the shareholders’ stake to a negligible 5%.

The ongoing stalemate between creditors and shareholders remain as a major hurdle to Oi’s recovery.

Leave a Comment

Previous post:

Next post: