Oi Creditors Approve Restructuring Plan at 15-Hour Meeting

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  • Fines would be paid in five yearly installments after 20 years
  • Deal imposes one-year limit on proposed capital increase

Oi SA creditors approved a plan to bring the Brazilian phone company out of bankruptcy protection after a dramatic 15-hour meeting that concluded at 2:30 a.m. in Rio de Janeiro. Hours later, investors drove the shares up as much as 22 percent.

Final changes to the restructuring plan included a proposal to pay for the fines owed to telecommunications regulator Anatel, which is Oi’s largest individual creditor, in five yearly installments after a 20-year grace period. Fines under the attorney general’s jurisdiction would be paid in monthly installments over 20 years. Anatel and the attorney general voted against the plan.

Oi also said a 4 billion real ($1.2 billion) capital increase will happen within a year and scaled back conditions for the cash injection, subject to the approval of the bankruptcy court. The plan, which restructures $19 billion in debt by giving creditors a stake of as much as 75 percent in the company, is likely to face legal challenges by shareholders unhappy with the dilution.

“We expect the capital injection to happen even before one year,” Chief Executive Officer Eurico Teles said. “We have firm commitments for the operation, including from Aurelius, with whom we’ve been litigating.”

Wrest Control

Aurelius Capital Management, a distressed-debt investment fund, has been among the investors involved in trying to wrest control of the company away from its board, led by businessman Nelson Tanure -- Oi’s second largest investor. Aurelius didn’t immediately respond to Bloomberg’s request for comment.

Shares surged to as high as 4.09 reais on Wednesday in Sao Paulo trading, while the company’s $1.79 billion bond due in 2020 rose 0.14 cent to 40.46 cents on the dollar.

At least 50 lawyers and creditors gathered in last-minute negotiations late into the night Tuesday to revise the proposal so it could be approved without the support of Anatel. Teles pleaded with creditors at the meeting for patience as he worked on the changes, and Oi’s trustee declared three recesses during the gathering to allow the negotiations to proceed.

Anatel, which is owed 11 billion reais, mostly in unpaid fines, decided to vote against the plan after the attorney general’s office concluded it must continue to press in court for full payment of Oi’s debts, according to a person close to the matter. The attorney general gave Anatel authority to approve or reject the plan.

Interest Expressed

The carrier is ready to be acquired, Teles said. China Development Bank is interested in investing and China Telecom Corp. has also expressed interest, but didn’t present a firm proposal, he said. Oi isn’t currently discussing a sale, he added

One hundred percent of labor creditors and BNDES, as well as 99.8 percent of small businesses and 79 percent of the class that encompasses public banks, bondholders and private banks voted to approve the plan.

“I’m deeply moved,” Teles said. “This is a victory so big that it makes my heart ache.”

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