Oi Said Close to $1 Billion Credit Line for Potential Tim Deal

  • Telecom company negotiating credit with two banks, source says
  • Oi has been pursuing a merger with Telecom Italia's Tim

Brazilian wireless carrier Oi SA is negotiating with two banks to provide as much as $1 billion in credit to refinance short-term debt as it prepares to make an offer to merge with competitor Tim Participacoes SA, according to a person with knowledge of the matter.

The banks are also likely to join the company’s M&A advisory team, according to the person with knowledge of Oi’s thinking, who declined to name the lenders and asked not to be identified discussing private information. Barclays Plc and Banco Santander SA are likely to get roles in the transaction, two other people said. Still, Grupo BTG Pactual will remain the lead negotiator, according to one of the people.

A merger is likely to increase efficiency for both companies in a crowded wireless market, but Oi has been the more proactive of the two in pursuing a combination. That’s largely because a merger would help it climb out from under its massive pile of debt. Net debt rose 7.5 percent in the third quarter to 37.24 billion reais ($9.2 billion), from the previous three-month period, according to Oi’s website.

LetterOne Holdings SA, Russian billionaire Mikhail Fridman’s investment company, has pledged to inject as much as $4 billion into the carrier, provided it pursues the Tim merger. Tim is controlled by Telecom Italia SpA.

Adviser BTG has troubles of its own. Its bonds and stocks plummeted after then-Chief Executive Officer Andre Esteves was arrested in November amid a widespread corporate corruption scandal. Esteves, who has denied any wrongdoing through his lawyers, was released from jail after being held for three weeks and is now under house arrest. While investors worried BTG’s troubles would torpedo Oi’s M&A efforts, the telecommunications company has said BTG is only an adviser.

Barclays and Santander’s involvement was previously reported Tuesday by Globo and Valor. Oi declined to comment, as did BTG. Barclays and Santander didn’t respond to requests for comment.

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