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Telecom OI files the largest reorganization case in Brazil to restructure BRL 65 billion debt, court issues decision staying proceedings

Brazilian telecom Oi, a corporate group of seven companies (including holding company Oi S.A., operational subsidiary Telemar Norte Leste S.A., and offshore special purpose companies Portugal Telecom International Finance B.V. and Oi Brasil Holdings Coöperatif U.A.), filed for court-supervised reorganization (recuperação judicial) before a court in Rio de Janeiro on Monday.

According to the filing, the debts to be restructured amount to BRL 65.4 billion, not including intercompany claims, which are worth additional BRL 47.8 billion. The debt, according to the list of creditors submitted by Oi, and separated by classes of claims determined by law, is as follows:

 

Class of Claims Listed Amount
Labor Claims BRL 668 million
Secured Claims BRL 3.3 billion
Unsecured Claims BRL 61.2 billion
Small Company Claims BRL 158 million

 

In addition to noteholders and banks, the unified list of creditors also includes suppliers, consumers, employees, and claims of BRL 10 billion held by Brazilian telecom regulator Anatel. In addition, there are claims not affected by the judicial reorganization, which were not disclosed.

In the documentation filed in court Oi stated that, from an administrative and economic perspective, the companies form a deeply integrated group that cannot be considered separately and therefore should be restructured as a whole. A substantive consolidation of the companies (which is common under reorganization proceedings in Brazil) may be supported or challenged by creditors, because it may affect noteholders differently.

The case was filed before the 7th Corporate Court of Rio de Janeiro, which admitted the substantive consolidation of Galvão Engenharia group in its judicial reorganization. Although the court has not analyzed yet whether Oi meets the requirements for the commencement of the reorganization proceeding, a decision was handed down by the court granting the stay of all proceedings against Oi for 180 days.

During the next few days, if the commencement of the case is accepted by the court, he will order (1) the submission of a plan of reorganization within 60 business days, which will still be subject to amendments, following negotiations with creditors; and (2) the appointment of a judicial administrator which will monitor the proceeding.

If the plan is finally approved by creditors, in a creditors meeting, and later confirmed by court, Oi will remain under reorganization until all obligations due in two years are complied with. If, however, the plan is not approved by the required majorities in each class of claims, and the cram down provisions cannot be applied, the court will convert the reorganization into a bankruptcy liquidation proceeding.

To access the list of creditors submitted by Oi, please click on the following hyperlink:  https://we.tl/wM7SBSKoqV

We remain at your disposal for any clarification you may need.

Felsberg Restructuring Team

Thomas Benes Felsberg

Paulo Fernando Campana Filho

Fabiana Bruno Solano Pereira

Pedro Henrique Torres Bianchi

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