Oi May Part With PJT in Hunt for Brazilian Legal Expertise

  • Company’s needs have changed with bankruptcy, Schroeder says
  • ‘Our situation was pretty different’ before June court filing

Oi SA, operating in bankruptcy since June, is looking for a financial adviser with more experience in Brazilian law to aid negotiations with bondholders and may cut ties to PJT Partners.

“We started negotiating with bondholders at the end of last year and our situation was pretty different,” Chief Executive Officer Marco Schroeder told reporters at a conference in Sao Paulo Wednesday. “Now that we are in a judicial recovery process, it is natural that we look for a financial adviser that understands very well the legal issues.”

Schroeder declined to name potential new advisers and said it was “possible” the company will part ways with PJT Partners as the bankrupt telecom company tries to restructure more than $20 billion in debt.

PJT didn’t immediately respond to a request for comment. Oi’s non-voting shares fell less than 1 percent to 2.72 reais at 11:12 a.m. in Sao Paulo.

Oi has reached tentative settlements with suppliers and labor groups, and is in talks with government regulator Anatel on unpaid fines and taxes, Schroeder said. The company continues to discuss possible debt restructuring terms with creditors.

“It is natural that they make counteroffers,” he said, referring to the debtholders. “They can give suggestions to the judicial administrator and to the company. We got some letters. The company is evaluating if it can adapt itself and eventually fulfill some of their requests.”

Convertible Debt

Debtholders called Oi’s restructuring plan “unfavorable and probably unacceptable” in a statement last month. The main dispute is Oi’s right under a company restructuring plan to redeem convertible debt. Creditors represented by Moelis & Co. argue the option for early redemption gives current shareholders power to avoid dilution if the company turns around, while leaving bond investors with a large loss if things go badly.

Oi proposed converting up to 32.3 billion reais ($10.2 billion) of bondholder debt into convertible securities with a face value of 10 billion reais. Lenders would get 85 percent of the company if Oi doesn’t pay off the debt in three years -- leaving current shareholders in control until then and in position to benefit from a rebound, according to creditors.

The 20.2 billion reais in debt with Brazil telecommunications regulator Anatel is also under discussion. Anatel wants its debt excluded from the judicial recovery, while Oi insists that it stay. The regulator says the Rio de Janeiro-based phone company owes about 15 billion reais in fines and 5 billion reais in taxes.

The judge presiding over the bankruptcy already decided Anatel should stay among the creditors, but the agency appealed. If it stays, the deadlock could be solved through mediation and a discount in the amount could be on the table, Schroeder said.

“I’m not saying this is what is going to happen, all I’m saying is that this could happen,” he said.

Schroeder declined to comment on the interest expressed by several investors, including Egyptian billionaire Naguib Sawiris and Paul Singer’s hedge fund, Elliott Management Corp.

“The most important thing right now is to renegotiate the debt and focus on operations,” he said. “We can look at alternatives of new investors later. But it is not our focus at this moment.”

— With assistance by Cristiane Lucchesi

    Before it's here, it's on the Bloomberg Terminal.