July 19, 2016 / 8:22 PM / 2 years ago

Funds, Abadi working on bid for Brazil's Oi -sources

SAO PAULO, July 19 (Reuters) - A group of a dozen investors, most of which are creditors and shareholders of Oi SA , have contacted investment bank Abadi & Co Global Markets Inc to help structure a potential takeover bid for the bankrupt Brazilian phone carrier, two sources directly involved in the matter said on Tuesday.

According to the sources, who asked for anonymity as the matter is private, the group seeking control of Oi, which filed for Brazil’s biggest-ever in-court reorganization, includes investment firms and an undisclosed telecommunications carrier that would act as Oi’s strategic operator.

The investors and New York-based Abadi, which specializes in restructurings in emerging markets, are discussing the terms of a bid, including the timing, the sources said. The Oi situation remains “very fluid” and it was not fully clear yet how a deal would be structured, the first source said.

Neither source said whether the group would pledge new money, although the first source noted that Oi does not need fresh cash in the short term. Abadi, through a press representative, declined to comment.

The Abadi-advised group is one of the few gearing up for tough bankruptcy talks with Oi, which succumbed to a heavy debt burden and mounting competition after years of shareholder disputes. At 65.4 billion reais ($20 billion), Oi’s petition for creditor protection is fraught with challenges due to a complex capital structure and wide creditor base, analysts said.

The move comes a few days after the Société Mondiale fund acquired a 6.6 percent stake in Oi. The fund, led by distressed debt investor Nelson Tanure, launched a campaign to replace most of Oi’s board - triggering speculation that it could pursue a takeover bid during Oi’s bankruptcy proceedings.

According to the first source, the Abadi-advised group is considering a negotiation with Tanure as one of the alternatives to reach a deal. The interests of both investor groups in Oi “are not necessarily misaligned,” said the source.

The group is likely to unveil terms of the takeover proposal to Oi before shareholders and creditors vote on a reorganization plan, the same source added. Íntegra Associados, a São Paulo-based advisory firm specializing in corporate turnarounds, is also working on the bid, the second source said.

João Cox Neto, a former chief executive officer of Mexico’s América Móvil SAB unit in Brazil, and Mauro Cesar Pereira de Araújo, a former chairman and CEO of wireless carrier TIM Participações SA, are working with the group and would be tapped to run Oi if the bid succeeds, both sources said.

Efforts to contact the executives for comment were unsuccessful.

A Rio de Janeiro court approved Oi’s bankruptcy protection petition on June 29. According to the second source, the success of Oi’s reorganization hinges on the ability of shareholders and creditors to agree to a reduction of Oi’s debt by about half.

$1 = 3.2748 Brazilian reais Writing by Guillermo Parra-Bernal; Editing by Cynthia Osterman

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