Oi bondholders committee, bond trustee appeal case conversion denial

By Caroline Salls

Pittsburgh, Feb. 10 – An Amsterdam District Court order denying conversion of two Oi SA Dutch subsidiaries’ suspension of payments proceedings into bankruptcy has been appealed by the steering committee of the company’s international bondholders committee and the indenture trustee for one of the subsidiaries’ bonds, according to a committee news release.

Specifically, the committee appealed the denial of the conversion of the Oi Brasil Holdings Coöperatief UA proceedings, and the bond trustee appealed the denial of the Portugal Telecom International Finance BV conversion.

The committee said the Dutch companies remain subject to oversight by court-appointed administrators and supervisory judges.

Those administrators, the steering committee, the indenture trustee and various other creditors had asked the Amsterdam court to convert those proceedings to bankruptcies and to appoint independent fiduciaries to supplant the conflicted directors appointed by Oi SA.

The court denied the conversion requests as premature on account of the Oi group having filed only a “draft” restructuring plan in the Brazilian insolvency proceedings, the release said.

The committee said the court accepted Oi Brasil Holdings Coöperatief’s assurances that its claims against Oi SA and Oi Móvel SA will not be harmed; and directed the Dutch companies to provide the administrators with the separate-company and other information they require to ensure a fair outcome.

The Court also ruled that the conduct of a company before the start of its suspension of payments – “no matter how illegal and prejudicial” – can never provide a basis to convert those proceedings to bankruptcy, the release said.

The appellate court is expected to rule this spring.

“We respectfully believe the district court erred by, among other things, ignoring the gross misconduct that we allege occurred since mid-2015 and trusting Coöp’s assurances that claims against its affiliates will be respected,” international bondholder committee U.S. counsel Allan Brilliant of Dechert LLP said in the release.

“We believe that the appeal we have filed is based on strong legal grounds and that the conversion into bankruptcy will prevent further actions that are detrimental to the interests of the Dutch companies.

“The steering committee remains committed to working with management, the Dutch administrators, Anatel and all stakeholders to negotiate a prompt consensual restructuring of the Dutch companies and the rest of the Oi group in a manner consistent with the laws of Brazil, the Netherlands and the United States.”

According to the release, that goal will require all parties to make compromises.

The committee said it believes the Oi group should be dramatically de-leveraged to enable it to make any necessary investments and position itself for sustainable, profitable growth over the long-term, distributions should fairly take into account the creditors’ respective rights and the separateness of entities, including intercompany claims, and the restructuring should treat similarly situated creditors equally.

If there is a proven need to raise new capital, the committee said all creditors should be afforded the opportunity to provide it on a fair and equitable basis.

The international bondholder committee holds more than $2 billion of bonds issued by the Dutch companies and other members of the Oi group.

Oi is a Rio de Janeiro-based telecommunications service provider. It filed for Chapter 15 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on June 21, 2016 under case number 16-11791.

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