Oi Bankruptcy Filing Torpedoes Stock of Services Provider Contax

  • Telemarketing services provider Contax drops to five-month low
  • Oi sought protection from creditors for its $19 billion debt

Telemarketing services provider Contax Participacoes SA slumped to a five-month low after one of its top clients, phone carrier Oi SA, filed for bankruptcy protection.

Contax lost 24 percent to 7.19 reais at 2:29 p.m. in Sao Paulo, on course for the lowest closing price since January. Investors dumped the stock on concern Contax will struggle to get paid by Oi for services already provided and concern future business will be curtailed. Oi accounts for about 40 percent of Contax’s revenue.

Oi, Brazil’s fourth-biggest wireless company, said late Monday that it’s seeking protection from creditors after failing to reach a deal on 65 billion reais ($19.1 billion) in debt. Contax’s press office didn’t respond to requests for comment.

"There’s a chain of Oi providers that will be negatively affected, and, among the publicly-traded companies, Contax is the worst of them," said Vitor Suzaki, an analyst at Lerosa Investimentos in Sao Paulo.

Oi’s bankruptcy is also hitting banks that are expected to have to increase bad-loan provisions. Lenders Itau Unibanco Holding SA, Banco do Brasil SA and Banco Bradesco SA contributed the most to the Ibovespa index’s slump on Tuesday.

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