Oi Top Shareholders Reach Agreement Ending Legal Power Struggle

Updated on
  • Societe Mondiale ends effort to call two shareholder meetings
  • Two vacant board seats said designated for Societe Mondiale

Two of the largest shareholders of Oi SA settled a legal power struggle as the phone company tries to dig out of almost $20 billion in debt.

Societe Mondiale Fundo de Investimento em Acoes, the investment arm of Nelson Tanure, and Pharol SGPS SA, Oi’s largest holder, agreed to end all legal claims related to shareholder meetings that Societe Mondiale had called for Sept. 8, according to a statement by Pharol on Tuesday. Tanure will get two seats on the board, according to a person familiar with the matter, and end efforts to call the shareholder meetings, Pharol said.

The settlement follows Monday’s resignation by Oi Chief Financial Officer Flavio Nicolay Guimaraes, who was replaced by board member Ricardo Malavazi Martins. Last week, the telecom operator submitted a proposal to resolve the biggest bankruptcy in Brazil’s history and settle with almost 67,000 creditors. The plan included a reduction of as much as 70 percent in the value of its bonds, as well as asset sales, new resources and the possibility of a merger or breakup.

Oi has two empty board seats, including one vacated by Marcos Grodetzky, who also resigned Monday. Those will go to Societe Mondiale as part of the shareholders’ agreement, according to a person close to the matter who didn’t want to be identified because discussions are private.

Tanure had called for two shareholder votes on Sept. 8 on whether to replace part of the company’s board with his nominees and consider legal action against Lisbon-based Pharol. A bankruptcy judge suspended the meetings, ordering the investors to seek mediation.

Oi’s bondholder committee considered the carrier’s recovery plan unfavorable. It reflects an “inappropriate attempt to mask reallocation of values for shareholders of the company, to the detriment of creditors,” the group said in an e-mailed statement last week. Oi’s board replied Monday, sayings its members “act in good faith, in defense of Oi’s interests.’’

“Oi became a tug of war and nobody is willing to let the rope go,’’ said Adeodato Volpi Netto, head of capital markets at Eleven Financial Research. “The board is acting as if Oi was too big to fail and nobody is too big to fail. There is a real risk that an extended deadlock leads the company to go broke.’’

Shares of Oi fell 1.7 percent to 2.93 reais in Sao Paulo Tuesday, paring this year’s gains to 50 percent. The stock tumbled 77 percent in 2015.

The board assignments were reported earlier by newspaper O Estado de S. Paulo, which didn’t say how it obtained the information.