Unique: Shareholder in Brazil’s Oi leans on distressed debt funds for help

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SAO PAULO (Reuters) – An influential shareholder in Brazil’s Oi SA (OIBR4.SA) is working with U.S. and UK distressed debt hedge funds to keep up his central position on the telecoms supplier because it struggles to emerge from chapter safety, 4 sources stated.

The emblem of Brazilian telecoms firm Oi SA is pictured on a payphone in Rio de Janeiro, Brazil November 1, 2017. REUTERS/Ricardo Moraes

The funds, the smallest group of Oi bondholders generally known as the G6, might assist Nelson Tanure, who has a 6.5 % stake in Oi and vital board clout, fend off rival restructuring plans by the corporate’s two largest bondholder teams.

The G6 consists of Solus Various Asset Administration LP, Attestor Capital LLP, Centerbridge Companions LP, Silver Level Capital LP, and Davidson Kempner Capital Administration LP.

Tanure’s alliance with distressed debt funds illustrates the tangled ties which have fashioned in Latin America’s largest-ever chapter, which has seen a procession of hedge and personal fairness funds dip into the method earlier than withdrawing amid creditor and shareholder infighting.

It additionally exhibits the lengths to which shareholders similar to Tanure – who has criticized opposing creditor teams as vulture funds – are keen to go to strengthen their hand earlier than a Nov. 10 assembly wherein collectors will vote on a plan to take the provider out of chapter safety.

As negotiations about Oi’s future intensify forward of the November assembly that would decide whether or not it survives as a going concern, a giant query is whether or not the G6 funds will stick by Tanure, the sources stated, as two of them have no less than briefly withdrawn help.

A spokesman for Tanure, who has invested in distressed corporations from the oil to media industries, defended the motivations of the allied funds, and denied any had withdrawn help.

“They’ve very completely different methods from vulture funds, who manipulate info, motivated by spurious motivations and are devoted to extremely short-term beneficial properties,” the spokesman stated.

Solus, Silver Level, and Davidson Kempner, a giant participant in sovereign and territorial debt disputes in Argentina and Puerto Rico, declined to remark. Attestor and Centerbridge didn’t reply to requests for remark.

Oi, Brazil’s fourth-largest provider, filed for in-court restructuring 16 months in the past, sagging beneath 65.four billion reais ($20 billion) of debt. At stake is the way forward for the only fixed-line telecoms provider in about one-third of Brazil’s 5,500 municipalities.

SEPARATE TRACKS

Negotiations to convey Oi out of chapter safety have primarily cut up into three separate tracks, stated the sources, who requested anonymity because of the sensitivity of the problem.

The so-called Advert Hoc Group of Oi Bondholders and Worldwide Bondholders Committee, which – along with allied collectors – maintain about 23 billion reais in debt, have met repeatedly with Oi’s administration during the last two weeks. These bondholders have put forth a proposal that would depart them with 88 % of Oi’s fairness.

The emblem of Brazilian telecoms firm Oi SA is pictured on a payphone in Rio de Janeiro, Brazil November 1, 2017. REUTERS/Ricardo Moraes

The federal government, which is uncovered to billions of of Oi debt by way of state banks and unpaid regulatory fines, has fashioned a working group of its personal to guard its pursuits.

On Monday, Brazil’s solicitor-general is assembly with U.S. non-public fairness fund TPG Capital Administration LP and state-owned China Telecom Corp (0728.HK) a couple of doable bid for Oi after it emerges from chapter safety, native media reported.

Tanure – who has already fashioned an alliance with majority shareholder Pharol SGPS (PHRA.LS) – is working with the G6, who’ve solely a fraction of the debt held by the primary bondholder teams. His proposal would indicate a considerably extra extreme haircut for the bondholders, the sources stated.

Underneath the Tenure deal, Oi would want to pay the G6 funds substantial charges up entrance in return for a dedication from the group to inject capital into the provider, the sources stated.

    Individuals near the opposite bondholder teams say the charges might attain 500 million reais, however folks associated to the Tanure group say this might solely occur if the capital injection took two years to materialize. A brief-term payment could be a lot decrease, round 20 million reais, one of many sources stated.

“That is about … remunerating for the mobilization of capital, one thing that’s widespread in all these negotiations,” Tanure’s spokesman stated.

It’s unclear how strong the G6 block stays: Davidson Kempner and Silver Level Capital fund have no less than briefly dropped out, 4 sources stated.

However causes the funds exited have been unclear. One supply stated their withdrawal was solely non permanent, to keep away from proscribing the funds’ means to commerce on Oi´s debt whereas negotiating with the corporate.

Each bondholder teams will want as a lot creditor help as doable going into the Nov. 10 assembly in Rio de Janeiro.

A plan authorised by Oi’s board final month was rejected by collectors for giving an excessive amount of management to Tanure’s Societe Mondiale FIA, two folks with information of the matter advised Reuters.

G6 help for Tanure’s various plan might change this. That’s as a result of provisions in Brazilian chapter legislation can decrease the edge wanted for approval of a restructuring plan in some conditions, legal professionals concerned within the deal say.

The decide overseeing the chapter continuing might decree a “cram down”, wherein disagreeing collectors are compelled to simply accept what a majority agreed to, the legal professionals added.

Ought to collectors vote down the restructuring proposal outright, the corporate could possibly be liquidated. The primary bondholders need to keep away from that in any respect prices, the sources stated, as they might stand to lose extra if the corporate have been liquidated than in the event that they accepted the Tanure-backed phrases.

($1 = three.28 reais)

Reporting by Gram Slattery and Tatiana Bautzer; Modifying by Susan Thomas and Andrew Hay

Our Requirements:The Thomson Reuters Belief Ideas.



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