Brazil's Oi approves debt-for-equity swap, legal wrangles continue (updated)

Pharol SGPS SA

06/03/2018 15:38

(Adds details on legal challenge by shareholder, adds context)
    SAO PAULO, March 6 (Reuters) - Brazilian telecoms company Oi
SA's  OIBR4.SA  board has approved the terms of a
debt-for-equity swap endorsed by creditors, even as a
shareholder said on Tuesday it had won a partial injunction
against the plan.
    In a Tuesday securities filing, Oi said the board approved
the issuance of up to 1,756,054,163 new shares, corresponding to
a maximum 12.29 billion reais ($3.81 billion). 
    Under the deal, unsecured bondholders will be able to
participate in the capitalization of Oi by swapping a portion of
their debt for shares in the company, as agreed in a
restructuring plan creditors approved in December.
    Oi, Brazil's largest fixed-line carrier, filed for
bankruptcy protection in June 2016, and an 18-month fight
between and among shareholders, bondholders, regulators, and
state banks ensued.
    In December, creditors approved a plan which would give them
a significant portion of Oi's equity, and a Brazilian federal
judge gave his blessing to the reorganization in January,
although many shareholders objected, including Pharol SGPS SA
 PHRA.LS , formerly Portugal Telecom.  urn:newsml:reuters.com:*:nNRA57cx70
    Shortly before Oi's announcement, Pharol said its Brazilian
subsidiary Bratel SARL had won a partial injunction from
Brazil's Market Arbitration Chamber (CAM) to block Oi from
implementing the debt-for-equity swap. The penalty for failing
to comply is a 122 million-real fine, Pharol said in a
statement.
    Oi said it believed CAM lacked the authority to interfere
with the debt restructuring plan and that the scheme had already
been approved by several judicial authorities in Brazil.
    "As Oi understands it, the authority to decide on acts
regarding the judicial recovery lies with the Seventh Circuit
Commercial Court of Rio de Janeiro, whose authority was upheld
by the Supreme Court," Oi said in a statement.
    Common shares in Oi jumped 4.2 percent to 3.99 reais and
preferred shares rose 3.3 percent to 3.80 reais by midday.
Brazil's benchmark Bovespa index  .BVSP  was up 0.57 percent.
    ($1 = 3.22 reais)

 (Reporting by Gram Slattery and Ana Mano
Editing by Susan Thomas)
 ((gram.slattery@thomsonreuters.com; +55-11-5644-7714))