August 9, 2016 / 7:27 PM / 2 years ago

Brazil's Oi seeks creditor protection for unit in Dutch court -sources

By Guillermo Parra-Bernal and Ana Mano
    SAO PAULO, Aug 9 (Reuters) - A Dutch court has accepted a
request by Brazilian phone carrier Oi SA  
to put one of its Netherlands-based units under protection from
creditors, two people with direct knowledge of the situation
said on Tuesday, handing creditors a victory as they seek to
recoup billions of dollars in losses.
    According to the sources, who requested anonymity since the
matter is confidential, Oi's request for "suspension of payment"
in an Amsterdam bankruptcy court allows for an independent
trustee to be appointed. The suspension creates a standstill for
payments to creditors for companies in the Netherlands.
    One of the sources said the trustee, who will look after the
interests of creditors during the unit's bankruptcy proceedings,
will be lawyer Jasper Berkenbosch of law firm JonesDay. The
court's decision is a "huge development because it forbids Oi's
management from representing the company without the trustee's
consent," said the first person.
    In recent months, several creditors including Aurelius
Capital Management LP asked the Dutch court to start bankruptcy
proceedings against Oi Brasil Holdings Coöperatief UA, as the Oi
unit is formally known. Under Dutch law, if the court approves
the petition, the trustee will be appointed to defend the
interests of creditors.
    Rio de Janeiro-based Oi and New York-based Aurelius declined
to comment. Efforts to confirm the decision with officials at
Amsterdam's commercial court were unsuccessful. Berkenbosch of
Jones Day could not be contacted for comment.
    Oi, Brazil's fourth-largest wireless carrier and the largest
fixed-line operator, filed in June for creditor protection in a
Rio de Janeiro court to restructure 65.4 billion reais ($21
billion) in debt. 
    The ruling makes it tougher for Oi to protect existing
shareholders from potential heavy dilution by bondholders. It
also gives more say to bondholders of Oi Brasil Holdings and
Portugal Telecom International Finance Co, both Dutch-based
subsidiaries of Oi, during reorganization talks, said investors
such as Paolo Gorgó.
    Both subsidiaries issued a combined $6.33 billion in bonds
outstanding. The ruling means Oi will have to deal with two
different in-court reorganization processes in two different
countries, a setback for the company, the sources said.
    Apart from participating in the proceedings, the trustee
will investigate Oi Brasil Holdings' prior and current
management teams and enforce the company's claims against parent
Oi and other affiliates, the court said in June.
 ($1 = 3.1555 Brazilian reais)

 (Additional reporting by Toby Sterling in Amsterdam; Editing by
James Dalgleish)
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