Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
The Biggest Bankruptcy Filing in Brazilian History Filed by Oi SA
Author: Joel R. Glucksman
Date: August 18, 2016
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Oi SA responsible for Brazil’s largest bankruptcy filing
Recently, Oi SA, one of the largest telecom companies in Brazil, announced that it had filed for bankruptcy protection. According to Bloomberg, the company’s announcement was reported worldwide because it is the biggest bankruptcy filing in the country’s history. The report found the company’s top fixed line phone carrier was not able to restructure its $19.3 billion debt load.
Oi SA falls into debt
In court documents, the company claimed that it would not be able to make its July payments on its debt due to a harsh recession. According to Reuters, Oi SA cited almost a decade’s worth of economic downturn in Brazil, growing competition in the mobile space and a failed merger for its decision to seek bankruptcy protection.
Negotiations with some of the company’s bondholders broke down over reorganizing $14.72 billion in debt due to stakeholder unrest in a newly reformed organization after the bankruptcy process. Bloomberg reported that their shares would be reduced because a large portion would be transferred to bondholders.
The company’s debt reorganization plan
As part of Oi SA’s restructuring process, the company has opened negotiations with Bratel BV, its majority shareholder with a 22.24 percent stake, according to The Wall Street Journal. It also plans to reach an agreement with some of its senior bondholders, including Pacific Investment Management Co., Citadel LLC and Wellington Management Co., who hold roughly 40 percent of the company’s debt.
The plan is for Oi SA to enter into a debt-for-equity swap with its bondholders to refinance operations and generate cash flow next year. In the meantime, Oi SA will maintain operations and plans to emerge from the bankruptcy process as a viable telecommunications business.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
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