Brazil's Oi owners to focus on improving business before selling stakes -sources

Pharol SGPS SA

24/08/2018 16:04

By Tatiana Bautzer and Carolina Mandl
    SAO PAULO, Aug 24 (Reuters) - The distressed asset
investment firms that are Brazilian telecom Oi SA's  OIBR4.SA 
top shareholders will focus on improving the company's mobile
and broadband operations instead of a near-term sale of their
stakes, two sources with knowledge of the matter said.
    Brazil's largest fixed-line telecoms carrier is expected to
complete a 4 billion real ($1 billion) capital raise by
year-end, and management will use proceeds to accelerate
investments in broadband and mobile networks. 
    Investors have warmed to the company since bondholders
scored the first major victory in a Brazilian bankruptcy
proceeding after three years of battles with shareholders. That
left funds including Solus Alternative Asset Management LP,
GoldenTree Asset Management LP and York Capital Management
Global Advisors LLC in control.
    Investment firms fought for the right to boost their shares
by participating in the capital raise, Reuters reported last
month. Oi sought court protection from its creditors two years
ago in Latin America's largest-ever bankruptcy proceeding. 
 urn:newsml:reuters.com:*:nL1N1UC1VG
    Oi and GoldenTree declined to comment. Solus and York did
not respond to requests for comment. 
    Among the top priorities for Oi's new management will be
reversing client attrition. 
    The company ended the second quarter with 59 million
subscribers, down 6 percent from a year earlier. It lost 8.5
percent of its mobile clients over the last year, ending June
with 36.5 million subscribers.
    But Oi told analysts this month it is quickly gaining market
share in a pilot project in Rio, where it tested ultra-fast
broadband. 
    According to the first source, who asked for anonymity
because he was not authorized to discuss the matter publicly,
the hedge funds believe they can obtain a higher value for their
stakes once Oi becomes more competitive and regains market
share.
    Another issue hindering a short-term deal is a legal dispute
with Brazilian telecoms regulator Anatel involving around 14
billion reais in regulatory fines, the other source said. Anatel
demanded that amount be considered separately from the debt
restructured in the bankruptcy court. 
    Oi shareholder Pharol SGPS SA is also challenging the
restructuring proceedings. The investment firms believe
potential acquirers will pay more for Oi once these legal issues
are sorted out.
    At a shareholder meeting scheduled for Sep. 17, Oi is
expected to appoint a new board and update its bylaws, including
rules surrounding any potential change in control.  

    ($1 = 3.9151 reais)

 (Additional reporting by Alberto Alerigi Jr.; Editing by
Christian Plumb and Meredith Mazzilli)
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