Relevant Documents:
Oi Notice Regarding DebenturesOi Response to Aurelius WritWrit document
A Dutch judge heard
Oi Brasil Holdings' and Capricorn Capital's
arguments this afternoon in Amsterdam. The judge will send her written ruling to the parties on the afternoon of May 2. Law firm Resor represented Brazilian telecommunications group Oi in court while Houthoff Buruma acted on behalf of Capricorn, a fund controlled by Aurelius Capital.
During the hearing, the parties reiterated the arguments outlined in a
writ issued to the court last month and in a
response issued by Oi over the weekend. Capricorn is seeking to prevent Oi Brasil Holdings Coöperatief UA, or FinCo, from transferring funds or making intercompany loans to the parent company or any of its affiliates to ensure Oi can pay an upcoming €231 million ($261.53 million) bond due in June.
A Capricorn managing director was questioned by the judge several times through a translator in court. During the hearing Capricorn defended its position as a PTIF bondholder. It revealed that as of December the fund owned €11 million ($12.4 million) in bonds and increased its position since then. The exact amount was not revealed in court, but was made known to the parties involved.
Capricorn believes that once FinCo repays the loan it owes to PTIF, there will be enough cash for PTIF to pay bondholders. PTIF borrowed money from FinCo and the loan is due on June 2, the court heard. As of December 2015 FinCo had €3 billion in cash.
Questioned by the judge, Capricorn admitted the money would not be enough to pay down the full amount owed to the bondholders, but enough to guarantee a 75% recovery.
Oi capital structure is available
here.
Bondholders’ Organization
Moelis is close to finalizing a committee of Oi bondholders, according to sources familiar with the situation. It was initially thought that Telemar holders would have formed a separate committee. The Brazilian telecom company, advised by PJT, told creditors it only wants to negotiate with one group.
The fact Oi asked creditors to form a single group has spurred speculation it may not honor the Telemar guarantee, sources said. The Telemar bonds are currently trading at 30 while the other notes are in the 20s.
The financial advisor has so far received approximately 12% to 13% of Oi bondholders from different maturities. Investors include M&G, Fosun, Fidelity, L&G, Wamco, Pimco, State Street, Doubleline, Loomis, BlackRock and Guggenheim Securities, Citadel Investments, GoldenTree and D.E. Shaw. The group represents approximately 25% of the Telemar creditors. Cleary Gottlieb is serving as legal counsel to that bondholder group.
Creditors that are part of the Moelis group are asking the company for a better understanding of the contingent liabilities to provide more data for an accurate waterfall analysis, sources said.
The company faces a €231 million maturity in July and the company is considering its options, sources told Reorg. The Brazilian telecom company is also advised by White & Case.
Investors expect Oi to come to market with a debt exchange. Last month, Oi
denied rumors that it’s considering a debt-for-equity swap entailing steep principal haircuts of up to 70% or 80% of face value. In a
call with investors, the company shed no light on its plans to address its capital structure and debt profile.