March 24, 2017 / 8:26 PM / a year ago

Creditors of Brazil's Oi balk at revised debt restructuring plan

SAO PAULO, March 24 (Reuters) - The two biggest bondholder groups in Brazilian telephone operator Oi SA said on Friday they “strongly oppose” the terms of a new debt restructuring plan the company intends to present in bankruptcy court.

Claiming the proposed terms “were not previously negotiated with either of the Oi bondholder groups,” the creditors said in a joint statement that Oi has “failed to engage” with them, nine months after filing for bankruptcy protection.

The statement, the first joint communication since the two bondholder groups split over the fate of the company in November, indicates that Oi’s creditors and controlling shareholders are far from consensus.

Oi is Brazil’s No. 4 wireless carrier. It declined to comment on Friday.

Last June, the company sought court protection from creditors on about 65 billion reais ($21 billion) in Brazil’s biggest-ever bankruptcy filing. On Wednesday, Oi unveiled a revised version of its restructuring proposal, which was originally presented in September.

Under the new terms, Oi’s financial creditors would receive 25 percent of the company’s equity and convertible bonds to be called in three years, giving them up to 38 percent of its shares.

Oi shares fell 8.5 percent to close at 4.40 reais on Friday, after gaining 16 percent on Thursday.

Oi Chief Executive Officer Marco Schroeder said on Thursday the new plan is an improvement as it offers a debt-for-equity option to accommodate feedback from creditors.

He said the proposal should be submitted to the court in its current form, though technically it can be changed until the moment creditors formally vote on it.

One of the bondholder groups, advised by Moelis & Co and supported by Orascom TMT Holdings SAE, calls for an alternative plan to inject up to $1.25 billion into Oi in return for a 95 percent stake.

The other group, advised by G5 Evercore and including Aurelius Capital Management, is also prepared to inject new capital into the company, but does not see a need for a new strategic investor, according to a person with direct knowledge of the matter. The person spoke anonymously because negotiations with Oi are private.

In the same joint statement, a third group of Oi creditors constituted of export credit agencies and banks also said the terms of the company’s proposal “were unacceptable.”

The two bondholder groups and the export credit agencies said they jointly have claims worth about $6 billion against Oi and subsidiaries. ($1 = 3.11 reais) (Editing by Matthew Lewis)

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