Oi describes oral proposal to noteholders, their proposal in response

By Wendy Van Sickle

Columbus, Ohio, Oct. 23 – Oi SA said it has been involved in discussions and negotiations with some individual holders or managers of entities holding beneficial interests of several series of notes and gave an update in a Monday press release.

The note series include Oi’s 9¾% notes due 2016, its 5 1/8% notes due 2017, its 9½% notes due 2019 and its 5½% notes due 2020; the 5 5/8% notes due 2021 and 5¾% notes due 2022 issued by Oi Brasil Holdings Cooperatief UA; and the 6¼% notes due 2016, 4 3/8% notes due 2017, 5 7/8% notes due 2018, 5% notes due 2019, 4 5/8% notes due 2020, 4½% notes due 2025 and 5.242% notes due 2017 issued by Portugal Telecom International Finance BV.

On Oct. 19, representatives of Oi and its financial and legal advisers met in person or by phone with representatives from and/or advisers to each noteholder and each noteholder's respective financial and legal advisers to discuss the terms of a potential transaction.

Oi oral proposal

No agreement regarding a transaction has been reached, but company representatives and each of the noteholder representatives discussed certain objections from other Oi creditors to the new version of the plan of reorganization filed on Oct. 11 in Oi’s judicial reorganization proceeding pending in Brazil

They also discussed and negotiated certain oral proposals with respect to the terms of a potential transaction.

Specifically, the company representatives delivered an oral proposal regarding certain modifications to the draft term sheet and plan support agreement disclosed by the company on Oct. 12. The material terms of the oral proposal are summarized as follows:

• A 14% commitment premium would be payable pro rata to committed investors on exercise of the warrants;

• Elimination of the backstop commitments and backstop premiums;

• The conditions precedent contained in the Oct. 12 draft term sheet and plan support agreement to exercisability of the warrants would be loosened;

• No break-up fee would be paid to any committed investor;

• The company would be permitted (with board approval) to increase the cash capital increase to an amount greater than R$3.5 billion on terms to be discussed; and

• A mechanism would be agreed pursuant to which the company would be permitted to terminate the deal if there is insufficient creditor support after some period of time to be determined.

Noteholders’ oral proposal

The noteholder representatives did not accept the company proposal and responded with an oral proposal, the material terms of which are summarized as follows:

• Oi’s ability to increase the cash portion of the capital increase to an amount greater than R$3.5 billion on terms to be discussed would be acceptable, provided that the committed investors receive the same economic recovery as they would under a framework where the cash capital increase was capped at R$3.5 billion;

• A 14% commitment premium payable pro rata to committed investors on exercise of the warrants would be acceptable with other terms related to payment of annual commitment premiums (including terms related to timing and frequency of payment) remaining as described in the Oct. 12 draft term sheet and plan support agreement;

• Terms related to the breakup fee and other fees and expenses other than the backstop premiums would remain as described in the Oct.12 materials;

• The conditions precedent contained in the Oct. 12 materials would remain unchanged; and

• Subject to further agreement on specific terms, a mechanism permitting the company to terminate the deal after some period of time to be determined if there is insufficient creditor support would be acceptable.

Oi said Monday’s update followed the termination of confidentiality agreements with noteholders to facilitate discussions and negotiations concerning Oi’s capital structure and potential alternatives for a proposed restructuring of, and capital infusion by means of a capital increase into, the company.

Oi is a Rio de Janeiro-based telecommunications service provider. It filed for Chapter 15 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York on June 21, 2016 under case number 16-11791.

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