Oi bondholder group in talks with ECAs, seeking stronger voice in negotiations

09 August 2016

by Camila Dias, and Fabiana Lopes

 

The Oi (D/D) ad hoc bondholder group’s financial advisor has been in contact with export credit agency (ECA) creditors to discuss the possibility of aligning in future negotiations with the Brazilian Telecom, three sources close to the matter told Debtwire. These efforts are in addition to the bondholder group’s talks with large Brazilian bank creditors.

 

The conversation has involved only the financial advisors of the two parties, according to the first source close to the matter. “Nothing has been decided so far,” this source said. “The advisors have had only preliminary conversations.”

 

The ad hoc group of bondholders has Moelis & Company as its financial advisor, and Cleary Gottlieb and Pinheiro Neto Advogados as legal advisors. The group represents more than USD 4bn or 40% of all types of outstanding international bonds, as reported.

 

The ECAs group has retained FTI Consulting as financial advisor and Mattos Filho and Milbank as legal advisors.

 

The ECAs and banks are evaluating the possibility of joining forces with the Moelis-advised group, according to the second source close to the matter. This not something easily done, however, as bondholder, bank and ECA interests can be quite different in terms of what they would accept in a restructuring proposal, this source noted.

 

“Bondholders are normally more flexible with these deals, and are more willing to accept haircuts, as many of them bought bonds at prices below par,” the second source said. “However, banks and ECAs are less flexible, and might at first work to extend their maturities.”

 

The second source believes that both parties can join efforts in the negotiations and collaborate among themselves, but not necessarily as a formal group.

 

“This decision will depend on the negotiations that each creditor makes individually with Oi and also on the plan that Oi presents,” the second source said. “They can combine their efforts to challenge Oi if the company proposes something that makes no sense for them.”

 

According to the third source, the idea would be to keep the ECA group and the bondholder group separate, even if they work together. “It is important that all the parties involved are aware of the negotiation terms that will be proposed to the company, while not necessarily joining forces formally,” the same source said.

 

Oi is still working on its business plan before resuming negotiations with bondholders, the third source said.

 

“It is likely that the company will hear the bondholders’ demands before presenting its plan, as a starting point, but no meeting has been scheduled so far,” the same source said. “A more in-depth negotiation, though, may happen only after the company files the plan.”

 

Oi is working with PJT Partners as financial advisor, while White & Case and BMA – Barbosa Mussnich Aragao acts as legal advisor.

 

A Moelis official declined to comment on the matter. An FTI official was not available for comment.

 

Oi’s bankruptcy protection request was accepted by a Rio de Janeiro court on 29 June. The request involves seven entities: Oi SA, Oi Movel SA, Telemar Norte Leste SA, Copart 4 Participacoes SA, Copart 5 Participacoes SA, Portugal Telecom International Finance BV and Oi Brasil Holdings Cooperatief.

 

The Telemar Norte Leste (CCC) EUR 750m (USD 838m) 5.125% unsecured bond due 2017 last traded at 25.50 on 21 July in small trades, according to MarketAxess.

 

The Telemar Norte Leste USD 142m 9.50% unsecured bond due 2019 last traded at 26.750 on 5 August including small trades, while the USD 1.787bn 5.50% unsecured bond due 2020 last changed hands at 26.75 Monday.

 

The USD 1.5bn 5.750% senior unsecured bond due 2022, issued by Oi SA, last traded at 24 Monday.