BRASÍLIA: Oi SA (OIBR3.SA) on Monday formally started talks to restructure $14.3 billion of bonds, pitting some of the world’s biggest investors against each other as Brazil’s most-indebted phone carrier fights for its survival.
In a securities filing, Oi said a group of bondholders that have Moelis & Co as their advisor signed a non-disclosure agreement to join talks. Reuters, citing sources, said the group of over 25 investment firms including BlackRock Inc, Citadel LLC and Pacific Investment Management Co, could sign the accord as early as Monday.
The decision to begin talks with the Moelis-advised group leaves unclear how, or whether, Oi will negotiate with other creditors such as hedge funds that have bought credit default swaps linked to Oi’s bonds. The carrier wants to negotiate with bondholders who “care about the company’s future,” one of those sources told Reuters.
At stake is the fate of Oi, the byproduct of a state-sponsored merger eight years ago and the only Brazilian carrier controlled by domestic capital. Shareholders see a restructuring facilitating a potential takeover of Oi, which they say could help narrow the gap with rivals controlled by Spain’s Telefónica SA and Mexican billionaire Carlos Slim’s América Móvil SAB.
Oi “intends to conclude the ongoing restructuring process promptly, as it believes that conducting negotiations with a sole steering committee representing the company’s bondholders will make the process more agile,” the filing said.
Shares posted their biggest intraday jump in 23 years on Monday, on hopes the tack could speed Oi’s turnaround. Nonvoting shares (OIBR4.SA) rallied 28 percent to 1.18 reais, helping pare the stock’s 53 percent slump this year.
Still, a disparate base of creditors, the multiple currencies of issuance and a complex debt structure in which liabilities from several units are consolidated at the holding company level, could make a quick resolution hard, said Francisco Velasco, a fixed-income analyst with Exotix Partners.
Oi’s restructuring would be Latin America’s second-biggest ever, behind a $15 billion debt overhaul by Mexican cement maker Cemex SAB in 2009, data compiled by Thomson Reuters showed. It would also dwarf the $5.2 billion restructuring of former billionaire Eike Batista’s OGX Petróleo e Gás SA two years ago, heretofore the largest such deal in the country.
“Different investors could embrace different strategies, making this situation like a four-player chess game in which you won’t understand anybody’s strategy until the very last minute,” said Paolo Gorgó, an Italy-based investor who analyzes distressed debt and turnaround cases for several newsletters.
Both Oi and New York-based PJT Partners Inc, which was hired in February to oversee the restructuring, declined to comment. According to the filing, law firms Barbosa Müssnich & Aragão and White & Case LLP were brought in as Oi’s legal consultants.
