Prices of Oi SA bonds jumped on Friday after Brazil's most indebted wireless carrier laid out the terms of a restructuring proposal aimed at cutting 50 billion reais ($14.5 billion) in obligations by more than half. In a securities filing, Oi asked banks to extend the maturities on its bonds and offered to exchange part of them into equity at a premium to current prices. Notes from a Netherlands-based Oi unit due this year were excluded from the plan.
If all the creditors abide by the terms of the proposal, Oi's gross debt could fall to 21 billion reais by the end of this year, Oi said in another document. The Rio de Janeiro-based company, which faces a payment of 230 million euros on some notes next month, is targeting the participation of 95 percent of bondholders.
Oi also disclosed a separate document outlining a June 11 bondholder proposal, in which creditors would agree to exchange their bonds for a 95 percent stake in the company. That proposal sped up the departure of its former chief executive officer, Bayard Gontijo, last week, sources said at the time. The company has yet to respond to the creditor proposal. Oi shares reversed earlier gains on Friday on the prospect that bondholders would take less equity than expected under the terms of the restructuring plan, potentially slowing talks.
Apart from taking sharp losses on 31 billion reais of bonds, holders of Oi bonds were offered 4.4 billion reais of new secured debt and 4.4 billion reais in new equity. Oi, the byproduct of a state-sponsored merger eight years ago and the only Brazilian carrier controlled by domestic capital, has for years spent heavily to cope with mandatory fixed-line expansion goals, hampering its ability to compete in the mobile and data parts of the market. Frequent disagreements among shareholders over strategy and a two-year long recession have also weighed on the company. Bondholders and minority shareholders alike see a successful restructuring as crucial.
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