Oi’s Cash Enough to Cover Debt Into 2017, CFO Guimaraes Says

  • Brazilian phone company is seeking to reduce leverage
  • Real plunge doesn't impact debt profile, Guimaraes says

Oi SA’s debt is protected against Brazil’s currency slump and the phone company will be able to meet its obligations into 2017, said its chief financial officer.

The Rio de Janeiro-based carrier kept 4.3 billion euros ($4.8 billion) in proceeds from the sale of its PT Portugal assets outside of Brazil as a natural hedge against the debt that it acquired through the Portuguese deal, according to CFO Flavio Guimaraes. The company had total consolidated gross debt of 51.3 billion reais ($12.9 billion) as of the end of June, according to its most recent earnings statement.

Oi is looking at opportunities to reduce its leverage and hired Rotschild to help map out its total debt, Guimaraes said. The depreciation of Brazil’s real to the lowest level on record doesn’t impact its debt profile, according to him. The currency lost 33 percent this year to close Monday at 3.9851 per U.S. dollar, and was the worst performer among 31 major tenders tracked by Bloomberg.

“There’s no effective impact of the Brazilian real on Oi’s balance sheet,” Guimaraes said by phone.

Oi’s $1.5 billion of notes due 2022 sank 6.27 cents to 57.86 cents on the dollar on Monday amid speculation that the company would restructure its foreign currency notes, which sent the bonds as low as 52.45 cents earlier. The bonds pared losses after Oi said in a regulatory filing Rothschild was hired to assess the most effective way to handle proceeds from sale of PT Portugal as it seeks to improve its debt profile.

While the cash the company has in hand allows it to rein in financing costs, it will consider chances to reduce expenses if it finds interesting opportunities, Guimaraes said.

Brazil’s fourth-biggest mobile carrier is forecast to post losses through 2017 after it agreed to merge with Portugal Telecom in 2013 to compete against Telefonica SA and Carlos Slim’s America Movil SAB. The carrier said last month that it is evaluating the sale of telecommunications towers and call centers to trim costs as it seeks to push out maturities on its debt. The company wants a "quick" sale of its assets in Africa, Guimaraes said in the interview.

Standard & Poor’s and Fitch Ratings stripped the telephone company of its investment grade in 2014 after Rioforte Investments SA, a subsidiary of Lisbon-based Espirito Santo International, defaulted on 897 million euros ($1 billion) in commercial notes to Portugal Telecom SGPS -- the company Oi was in the midst of merging with.

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