Oi's new plan foresees the sale of R$15 billion in assets

After successive delays, the new version of Oi's judicial recovery plan was presented on Tuesday, 6th. The plan provides for new financing of US$ 650 million (around R$ 3.2 billion at the current exchange rate), and the sale of assets valued at more than R$15 billion, in addition to discounting and converting old debts. The telecom has not yet reached an agreement with creditors, who must now evaluate the new proposal.

“The expectation is that the total reduction in financial debt will reach around 75%”, said Rodrigo Abreu, in an interview with Estadão/Broadcast. He stepped down as president of the operator in January, but continues as a member of the board of directors and leader of negotiations with creditors.

SUPPORT

The months-long delay in completing the plan is due to the complexity of the negotiation and the difficulty in reaching an agreement between the company and its creditors. Oi entered judicial recovery for the second time in March 2023, with debts of R$44.3 billion.

The first version of the plan was presented in May last year, and the company expected to sign a Restructuring Support Agreement (RSA) with creditors by July, which did not happen. The RSA's role is to gather the necessary support for approval of the plan. There are still conditions for this to happen, according to Abreu.

“The objective of reaching a support agreement for the plan with a group of creditors that can guarantee approval at the meeting still exists, and negotiations with this group continue even after the plan protocol,” said Abreu. The creditors' meeting to vote on the new plan is expected to take place within 30 days, that is, at the beginning of March.

In a note, Oi informed that, with the new plan, it hopes to achieve the restructuring of its financial debts, adapting them to its payment capacity. This will be done without compromising its operation and the expansion of its business in the fiber optic segment, the company's main product.

OLD DEBTS

One of the main points of the plan is the release of financing of US$650 million, which will be used to pay the emergency loan (debtor in possession, or DIP) of US$325 million obtained by the tele last year, as well as to maintain the working capital of telecommunications operations.

The first version of the plan predicted that the new financing would be US$750 million, but the amount was reduced during the negotiations because the new version foresees bringing forward the inflow of resources with the sale of assets, explained Abreu.

Of this US$650 million, US$450 million must come from current creditors, while the other US$200 million would come from third parties. In return for the commitment to a new injection of resources, creditors will receive a commission, called a backstop fee, and will have priority in payment. If there is a delay in releasing these resources, Oi is authorized to seek a bridge loan of US$125 million to replenish its cash flow.

Abreu recalls that Oi's fixed-line telephone concession is still “very deficient” and consumes cash. The company is negotiating a relaxation of regulatory obligations with the National Telecommunications Agency (Anatel) and the Federal Audit Court (TCU), but this solution is not simple. “The reduction in cash consumption does not happen immediately. It will be obtained over several months after the agreement and respective migration of the service provision regime”, he estimates.

Among the options for paying off old debts, Oi offers the conversion of part of the outstanding balance into shares, as well as payments in installments and at a discount. “The proposed dilution for current shareholders has not been changed in the current plan and remains at 80%,” he said.
Under the new plan, Oi wants to anticipate the sale of assets and raise R$15.3 billion through the sale of the broadband operation (Oi Fibra), the stake in V.tal, in addition to real estate and other assets.

The information is from the newspaper The State of S. Paulo.