News
Brazilian operator fails to renegotiate with creditors, aims to continue offering services to customers.
Oi late on Monday filed for bankruptcy protection after discussions with creditors over its weighty debt burden came to nothing.
The Brazilian telecoms operator announced that it viewed the decision to file for judicial reorganisation, as the process is known in the country, as the most appropriate course of action to protect group companies, given the challenges it faces it at this time.
These challenges include the maturity schedule of its debts, the economic situation in Brazil, and the threat to company assets, which could be frozen through legal proceedings, for example.
Documents published by Oi show that the group has just over 50 billion reais in bondholder debt, but according to financial newswires the total comes in higher than that; Bloomberg reports a figure of BRL65 billion (€17 billion), including sums owed to suppliers and other debts.
Oi said filing for bankruptcy protection will enable it to ensure it is able to continue offering services in Brazil. Specifically, it stated it would "preserve the continuity of its offering of quality services to its customers, within the rules and commitments undertaken with the Brazilian National Telecommunications Agency (Anatel)." It also said the move would help protect group companies and their cash reserves.
Regulator Anatel immediately issued a statement committing to monitoring the restructuring process, but said it would not intervene. However, it reserves the right to step in, should it become necessary, to "protect the public interest and the rights of consumers, as well as the stability of the Brazilian telecommunications sector."
Oi, which offers fixed-line, broadband, TV and mobile services to consumers and businesses, has trodden a difficult path in recent years.
It brokered a deal to merge with Portugal Telecom in the autumn of 2013, but the latter’s controversial debt investment forced a renegotiation of that agreement and before the tie-up was fully completed Oi agreed to sell Portugal Telecom’s domestic assets to French cable group Altice for around €7.4 billion. It closed the deal just over a year ago.
The failure of the Portugal Telecom merger led to the resignation of then-CEO Zeinal Bava in October 2014, when he was replaced by chief financial officer Bayard De Paoli Gontijo.
After 14 years with Oi, Gontijo resigned earlier this month. The Oi board elected financial administrative officer Marco Norci Schroeder as the company’s new chief executive, noting that he will also retain his previous role.
