Oi submits adjusted version of reorganization plan to Brazilian court

By Caroline Salls

Pittsburgh, Oct. 12 – Oi SA made adjustments to the terms and conditions of the judicial reorganization plan for the company and its Oi Movel SA, Telemar Norte Leste SA, Copart 4 Participacoes SA, Copart 5 Participacoes SA, Telecom International Finance BV and Oi Brasil Holdings Cooperatief UA subsidiaries, according to a news release.

The changes were approved by a majority of Oi’s board of directors at a meeting held on Tuesday.

The new plan was filed Thursday with the 7th Corporate Court of the Judicial District of the Capital of Rio de Janeiro, in compliance with the deadline set by the Court.

Noteholder talks

In a separate release, Oi said it held a meeting with some holders of, or managers of entities holding, beneficial interests in, 9¾% senior notes due 2016, 5 1/8% senior notes due 2017, 9½% senior notes due 2019, 5½% senior notes due 2020, 5 5/8% senior notes due 2021, 5¾% senior notes due 2022, 6¼% senior notes due 2016, 4 3/8% notes due 2017, 5 7/8% senior notes due 2018, 5% senior notes due 2019, 4 5/8% senior notes due 2020, 4½% notes due 2025 and 5.242% senior notes due 2017.

The company said it executed confidentiality agreements on Tuesday with the noteholders who are members of the steering committee of the international bondholder committee (IBC) and the steering committee of the informal group of bondholders to facilitate potential discussions and negotiations concerning Oi’s capital structure and potential alternatives for a proposed restructuring of, and capital infusion by means of a capital increase into, the company.

As of Thursday, Oi said no negotiations had been held and no agreement concerning the terms of a potential transaction had been reached with the IBC, the bondholder group or the equity commitment agreement (ECA) parties.

Company presentations

During the IBC/bondholder group/ECA meeting, the company said its representatives shared two presentations, including one prepared by financial adviser Laplace Financas regarding Oi’s restructuring under a new version of the plan of reorganization filed contemporaneously with the judicial reorganization proceeding pending in Brazil. The second presentation was prepared by the company regarding recent revisions to its long-term business plan and capital expenditure program.

Oi said its representatives expect that that capital expenditures in the second half of 2017 will be higher than the first half.

In addition, the representatives said they aimed to address a portion of the liquidated and unliquidated claims Agancia Nacional de Telecomunicações (Anatel) holds or may hold against the company in various ways, including by applying R$1.3 billion of judicial deposits made by Oi to reduce the total amount of the Anatel claims.

Capital increase

The representatives said the opportunity to fund or backstop all or any portion of a strategic creditor capital increase will be offered to all unsecured creditors that elect a conversion option. To date, the company said it has not obtained any commitments from any party to backstop or fund the capital increase or to support the new version of the plan.

The Laplace presentation said the capital increase may be funded by either contributing new cash or equitizing claims. The price for the new cash portion will be equal to a 30% discount to the future VWAP, and the price for the portion funded by equitizing claims would be equal to a premium of 42% above the future VWAP.

Although a first-call general meeting of creditors is scheduled for Oct. 23, the representatives said they did not know if the requisite quorum of holders of claims eligible to vote on the new version of the plan would be present.

If no quorum is present at the first call, the new version of the plan would be voted on at the second-call general meeting scheduled for Nov. 27.

Default treatment option

Under the new plan, if a par fixed-payment debt instrument option is oversubscribed, the excess of class III claims the holders of which selected that option over the subscription cap would be treated by default under another treatment option that provides a debt instrument with a 19-year term and a 10-year principal grace period.

According to another news release, representatives of Oi and its financial and legal advisers met with noteholder representatives beginning on Aug. 31 and continuing throughout September and October to discuss the terms of a potential transaction.

Although no agreement was reached, Oi said discussions and negotiations with the noteholders regarding the execution of plan support agreements and equity commitment agreements reached an advanced stage.

On Wednesday, Oi said its representatives and the noteholders negotiated a draft written restructuring term sheet, setting the terms of a potential capital increase, as well as a draft form of a plan support agreement.

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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