Oi Creditors Get Pushback From Aurelius on New Restructuring

  • Moelis reaches out to additional lenders for broader support
  • Aurelius says creditors group misunderstands who’s senior

Aurelius Capital Management, a dissident bondholder in Oi SA, is trying to foil a fresh $19 billion debt restructuring proposed by the bankrupt telecom company’s biggest creditors.

The hedge fund is pushing back against a group of about 70 creditors advised by Moelis & Co., which is seeking a wider array of stakeholders to support its plan after a previous effort collapsed earlier this year. The dispute revolves around bonds issued by Oi’s subsidiaries, particularly Telemar Norte Leste SA, which provides telecom services in states including Rio de Janeiro.

“The Moelis group has been a Telemar noteholder group dressed up to look like a broad-based Oi noteholder group,” said Mark Brodsky, chairman of New York-based Aurelius, in an e-mail Thursday after learning of the renewed effort.

Aurelius said Moelis represented only the holders of bonds backed by Telemar. But people familiar with the matter said that 60 percent of the Moelis group’s bonds are not guaranteed by Telemar, Oi’s main cash generator. The people asked not to be identified because the matter is confidential. Brodsky’s hedge fund owns bonds guaranteed by Oi’s other entities, which he didn’t specify.

“The Moelis group has promoted the myth that the Telemar notes are senior to the notes of Oi’s finance subsidiaries, whereas -- as we will soon show -- the opposite is the case,” Brodsky said.

Representatives for Rio de Janeiro-based Oi and New York-based Moelis declined to comment. The advisory firm hasn’t disclosed details of the group’s holdings in Oi.

Value Battles

About 30 creditors including Aurelius that own approximately $2 billion of bonds without Telemar’s backing have discussed their own restructuring plan, Bloomberg reported last week. They’re advised by Houlihan Lokey.

The Moelis group, led by funds including billionaire Ken Griffin’s Citadel LLC and Western Asset Management Co., holds $4 billion of Oi securities. Representatives for Western Asset Management and Chicago-based Citadel declined to comment. A representative for Houlihan Lokey didn’t respond to inquiries. 

Aurelius has a history of litigating against troubled borrowers, including the government of Argentina and Energy Future Holdings.

Oi filed the biggest bankruptcy in Brazil’s history in June after some board members disagreed with a debt swap plan proposed by the Moelis-led group that would have given the bondholders 95 percent of the company.

Brazil’s fourth-biggest wireless company was built through a series of mergers and went through a number of leadership changes. It operates part of the country’s landline phone system, which has proven onerous -- the company has a legal commitment to expand and maintain the obsolete network. It aims to keep serving customers through the bankruptcy process, the company said in a filing.

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