A group of creditors has objected to a restructuring proposal from Brazilian telecommunications company Oi, saying the plan contains “illegal and abusive elements” that favor shareholders over bondholders.
The bondholders added that Oi has not involved the “most important creditor constituencies” in discussions or disclosed information relevant to the restructuring plan and the company’s financial situation. The creditors also oppose the part of the plan that allows Oi to sell assets without input from bondholders and without having to go through a competitive process.
Members of the ad-hoc group of bondholders, advised by Moelis & Co, and Egypt’s Orascom TMT Investments presented a separate restructuring plan in December, offering to swap BRL24.8bn ($7.69bn) in outstanding bonds for a 95% equity stake in Oi. The plan proposes exchanging Oi’s remaining bond debt for BRL5.8bn in new notes. The alternative plan also lays out BRL37bn in investments in five years and includes a $1.25bn capital increase, with $1bn from a public share offering and $250m from Orascom.
According to the group of bondholders, the alternative plan will more likely earn the support of Oi’s creditors, including the banks and export credit agencies represented by FTI Consulting. Oi said last month that it will analyze the proposal “in due course” and also consider suggestions from other creditors.
US hedge fund Elliott Management is preparing its own investment proposal for Oi. Elliott and Oi held talks last year but did not reach an agreement.
Brazil’s Communications Minister Gilberto Kassab said in an interview with local daily Folha de S. Paulo that the government is prepared to intervene if the different sides do not come to an agreement in bankruptcy court.
Shares in Oi dropped 2.28% to BRL2.57 on Tuesday.