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Troubled Brazilian telco reportedly offers bondholders new debt worth 30% of what they are owed.
Oi this week filed a debt restructuring plan that according to several reports offers a raw deal for bondholders.
The troubled Brazilian telco, which filed for creditor protection in June, has offered bondholders new debt worth approximately 30% of what they are owed, reported The Wall Street Journal on Monday.
Holders have the option to convert these bonds to equity representing up to 85% of Oi’s capital if the telco does not pay out in three years.
However, this would be a bitter pill for bondholders to swallow.
"If the company does not perform well, creditors get 85% of the equity, which will be worth zero, not to mention liabilities to be assumed as a shareholder," said an unnamed bondholder, in a separate report by Reuters.
Oi owed 65 billion reais (€17 billion) when it filed for bankruptcy, which includes BRL15.4 billion worth of liabilities held by regulators and tax authorities, and approximately BRL34 billion held by unsecured creditors, which includes bondholders.
According to the reports, as well as the 70% haircut offered to bondholders, Oi is also considering asset sales, including real estate and its mobile unit, and has also proposed converting fines owed to Brazilian regulator Anatel into investment commitments.
Furthermore, creditors who offer fresh funds to help Oi exit bankruptcy will be at the head of the queue when the operator comes to repaying its debts, said the Reuters report.
According to another report, this time by Bloomberg, Oi has 30 days to negotiate with debt holders and shareholders before presenting a revised plan.
