December 19, 2017 / 10:58 PM / 7 months ago

Oi creditors approve largest-ever Latin American restructuring

RIO DE JANEIRO (Reuters) - Creditors in Brazilian telecoms company Oi SA (OIBR4.SA) approved early on Wednesday morning a plan to restructure $20 billion in debt owed by the firm, overcoming the main hurdle in Latin America’s largest-ever bankruptcy process.

Brazilian telecommunications firm Oi SA officials and representatives of creditors attend the Oi's General Creditors' Meeting in Rio de Janeiro, Brazil December 19, 2017. REUTERS/Pilar Olivares

After a marathon 15-hour meeting in Rio de Janeiro, three of four creditor classes voted nearly unanimously for the plan.

The only major ‘no’ vote appeared to come from national telecoms regulator Anatel, which held billions of dollars in Oi debt through unpaid regulatory fines.

“The management believes that the approved plan serves all the stakeholders in a balanced manner and guarantees the operational viability and sustainability of the companies in recovery,” Oi said in a filing early on Wednesday.

The vote caps off a year and a half of bruising negotiations, in which creditors and the company fought over how to best restructure some 65 billion reais ($20 billion) in debt.

Brazilian telecommunications firm Oi SA president Eurico Teles (2nd R) speaks during Oi's General Creditors' Meeting in Rio de Janeiro, Brazil December 19, 2017. REUTERS/Pilar Olivares

At stake in the process - plagued by fighting among creditors, shareholders and management - were more than 100,000 jobs that would have been lost if the company was liquidated.

Attention will now turn to China Telecom Corp (0728.HK) and China Mobile Ltd (0941.HK), which have expressed interest in taking over Oi after it emerged from bankruptcy protection.

The Chinese are the latest in a string of foreign investors who have floated a potential cash injection into Oi, Brazil’s largest fixed-line operator. Management has acknowledged the need for fresh cash and included a 4 billion-real capital increase from creditors in their recovery plan.

New capital would be used to expand fixed-line broadband and fourth-generation cellular networks, according to court documents, in a bid to catch up with more technologically advanced competitors such as Telefonica Brasil SA (VIVT4.SA) and TIM Participacoes SA (TIMP3.SA).

CONTENTIOUS TALKS

The venue for one of Brazil’s most contentious corporate battles this year, a 22,000-square-meter convention center known as Riocentro, hosted boxing matches at the 2016 Olympic Games.

The company had assembled the infrastructure for the meeting - which was presided over by some 1,000 workers - twice before, but was forced to break apart the preparations as rifts between creditors and the company caused delays.

The creditors meeting started at 11 a.m. on Tuesday. However, major creditors such as state banks BNDES and Banco do Brasil SA (BBAS3.SA) requested multiple relatively short delays to request tweaks to the company’s plan.

Among the major changes was a modification to the corporate governance of Oi. A transitional Oi board will be composed of a mix of existing board members and members chosen by investors in the company. That board will eventually have a say over the composition of the firm’s management.

The deliberations went ahead despite efforts by influential shareholder Nelson Tanure, whose investment vehicle Societe Mondiale controls the board through alliances, to stop the vote, including complaints to courts and regulators after a judge removed him from negotiations.

Tanure, an investor with a litigious past, is likely to continue with legal appeals, adding some uncertainty to Oi’s future.

Under the restructuring plan, creditors such as distressed asset specialists Aurelius Capital Management and Goldentree Asset Management could swap their debt for up to 75 percent of the carrier’s stock.

Among the parties that could lose are Portugal’s Pharol SGPS SA (PHRA.LS), whose 27.5 percent of voting shares in Oi stand to be severely diluted.

Reporting by Rodrigo Viga Gaier; Additional reporting by Leandro Goy in Brasilia; Writing and additional reporting by Gram Slattery in Sao Paulo; Editing by Stephen Coates and Louise Heavens

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