Banks, investors set Portugal Telecom CDS auction for July 21

lunes 11 de julio de 2016 19:50 GYT

SAO PAULO, July 11 (Reuters) - Holders of about $210 million in credit default swaps issued to insure against the bankruptcy of Brazilian phone operator Oi SA are likely to get paid later this month after an industry group scheduled a July 21 auction of the securities.

Earlier this month the New York-based International Swaps and Derivatives Association (ISDA) declared a "credit event" triggering the auction after Oi sought protection from creditors in June, in Brazil's largest-ever bankruptcy filing.

Investors buy credit default swaps as insurance against a potential default by a bond issuer.

A committee of 15 banks and investors coordinated by the association announced the auction date in a statement on its website on Monday. The auction will determine the final value of bonds, so that the contracts linked with the swaps are repaid, sources have told Reuters.

The bonds were issued by Oi unit Portugal Telecom International Finance BV. The gross notional amount of the swaps was $1.4 billion as of July 1, according to data on ISDA's website.

Oi is seeking to restructure about 65 billion reais ($20 billion) of debt.

Rio de Janeiro-based Oi will propose shareholders and creditors a mix of cuts in value of principal, longer maturities and a potential swap of debt into equity, Chief Executive Officer Marco Schroeder told Reuters on June 30.

A preliminary list of the bonds in the auction is available on the ISDA website. It includes seven euro-denominated securities issued by Portugal Telecom International, which mature between 2016 and 2025 and are worth a combined 4.150 billion euros ($4.6 billion).

A final list of the bonds in the auction will be announced July 18.   Continuación...