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Oi Creditor Groups Announce Revised Term Sheet for Viable, Sustainable Alternative Restructuring Plan Addressing Feedback from Oi’s Senior Management; Conflicted Board Members Continue to Interfere with Negotiations

NEW YORK--(BUSINESS WIRE)-- The Steering Committees of the International Bondholder Committee (the “IBC”) and the Ad Hoc Group (the “AHG”) of bondholders (the “Oi Creditor Groups”) of Oi S.A. and its affiliates (collectively, the “Company” or the “Oi Group”) announce that, as disclosed by the Company on November 6, 2017, the Oi Creditor Groups, together with the committee of export credit agencies, facility agents and banks (ECAs) represented by FTI Consulting (the “ECAs”), transmitted a revised term sheet to the Company for alternative plan(s) of reorganization for the Oi Group (the “Revised Creditor Term Sheet”). The Revised Creditor Term Sheet, together with the letter of transmittal and a letter from FTI Consulting regarding the availability of vendor financing by 2020, are attached hereto as Exhibit A.

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Unfortunately, notwithstanding the fact that the Revised Creditor Term Sheet was developed specifically to reflect the feedback of the Oi Group’s senior management, the majority of the Company’s board of directors summarily rejected the Revised Creditor Term Sheet in the middle of the negotiations, proving once more that they are driven by the objective of enhancing the interests of existing shareholders, to the detriment of the best interests of the Company and its other stakeholders. This confirms yet again that a majority of the Company’s board of directors is blatantly conflicted.

Instead of carefully considering the Revised Creditor Term Sheet, as their fiduciary duties would demand, a majority of the Company’s board of directors proceeded to summarily appoint two new executive officers that are also board members (see the Company’s November 3, 2017 Notice to the Market), which constitutes an outrageous violation of corporate governance standards. It is obvious that such new officers were appointed in order to undermine and circumvent the efforts of the Oi Group’s senior management to negotiate fair restructuring plan(s) and instead cater to the interests of the Company’s minority shareholders exerting control.

In addition, a majority of the Company’s board of directors also approved a plan support agreement and term sheet (see the Company’s November 4, 2017 Notice to the Market) (the “November 4 Notice”) (the plan support agreement and term sheet together, the “Shareholder Plan”). Although the terms of the Shareholder Plan as approved by the board are not yet public, previously public versions of the Shareholder Plan make clear that it is backed by the minority shareholders exerting control in an attempt to preserve their equity position, and attempt to do so by enlisting what the Oi Creditor Groups understand to be only a handful of insignificant holders that also hold equity and who are seeking exorbitant fees at the time the transaction inevitably fails. Moreover, the conflicted, insignificant holders supportive of the Shareholder Plan have thus far refused to be identified since they first began negotiating in secret with the Company’s minority shareholders exerting control. Accordingly, the Shareholder Plan lacks creditor support, is irresponsible and doomed to lead to a costly waste of corporate resources.

Moreover, the criticisms of the Revised Creditor Term Sheet in the November 4 notice are unfounded. By way of example:

  • Contrary to the assertions in the November 4 Notice, the Revised Creditor Term Sheet provides for identical treatment for all bondholders on account of their bond claims, and simply provides for incremental compensation for those willing to commit capital for an extended period of time.
  • Regarding the purported criticism that the Revised Creditor Term Sheet is conditioned on a new regulatory regime, this is misleading—the Revised Creditor Term Sheet is not predicated on a regime change but rather regulatory adjustments to allow the Company to remain competitive and viable in the long term.
  • In response to the criticism that the Revised Creditor Term Sheet is nonbinding, this criticism is misplaced—the Company’s management is aware that the Oi Creditor groups are prepared to enter into appropriate plan support agreements expeditiously, as indicated in the Revised Creditor Term Sheet itself (and all prior term sheets). The status of negotiations simply reflects the bad-faith delaying tactics dictated by the majority of the Company’s board of directors.

Further, as noted above, the members of the Oi Creditor Groups, who have at every stage reiterated their willingness to make substantial contributions by converting a significant portion of their debt into equity and contributing considerable new money (provided that the burdens of the restructuring are equitably shared, adequate governance arrangements are put into place and other reasonable conditions precedent are met), have in excess of US$370 billion of assets under management and more than sufficient assets to provide the full capital raise. The identities of the members of the Steering Committees of the IBC and the AHG are well known to the Company as they have signed NDAs with the Company. The Steering Committees are comprised of the following entities: (i) Aurelius Capital Management, LP, (ii) Canyon Capital Advisors LLC, (iii) Citadel Equity Fund Ltd, (iv) York Capital Management Global Advisors LLC, (v) Benefit Street Partners LLC, (vi) Brookfield Credit Opportunities Master Fund, L.P., (vii) GoldenTree Asset Management LP, and (viii) Redwood Master Fund, LTD. Such entities have individualized their claims and can vote approximately US$3.3 billion in the aggregate at the upcoming creditors meeting, and together with the ECAs (who also supported the Revised Creditor Term Sheet, and have total claims in excess of US$900 million), the total amount of claims represented by the Steering Committees and the ECAs is more than US$4.2 billion. Additionally, adding other claims from members that are not part of the Steering Committees of the AHG and IBC, total claims reach approximately R$22 billion.

The Revised Creditor Term Sheet, which was transmitted to the Company on October 26, 2017, was the result of five days of meetings in New York between the members of the Steering Committees and the Company’s senior management and legal and financial advisors. Attending the meetings on behalf of the IBC and the AHG were representatives from the firms identified in this press release. The advisors to the ECAs also participated in the meetings.

The Revised Creditor Term Sheet was based on the Oi Group’s updated business plan and addresses the feedback provided by the Company’s senior management to the Oi Creditor Groups’ prior creditor term sheet (which was provided to the Company on October 2, 2017 and made public on October 13, 2017). The Oi Creditor Groups believe that the plan(s) contemplated by the Revised Creditor Term Sheet (the “Revised Creditor Plan(s)”) are in the best interest of the Oi Group and all its various stakeholders. In particular, the Revised Creditor Plan(s) would, among other things, provide for the following:

  • New Capital Commitments and Sustainable Business Plan: The Revised Creditor Plan(s) provide for a fully backstopped capital increase for the Oi Group in an aggregate amount of R$4 billion, which funding would allow the Oi Group to properly address all of its projected capital expenditures and other investment needs, which are essential for the Oi Group’s long-term growth.
  • Equitable Treatment among Stakeholders: The Revised Creditor Plan(s) provide equitable treatment among unsecured financial creditors, ensuring its legal viability and providing a path for the prompt implementation of the Revised Creditor Plan(s) and the capital increase. The Revised Creditor Plan(s) also enable the existing shareholders to retain 12% of the equity of the reorganized company before dilution for the new money and to participate in the capital increase.
  • Cash Flow Options For the Company: With respect to the restructured bond debt, the Revised Creditor Plan(s) provide the Company with the option of electing between a lower cash-payable interest rate or a higher interest rate with a portion of the payment deferred in time, depending on management’s views as to the most efficient use of the Company’s cash.
  • Governance Reforms: The Revised Creditor Plan(s) also contemplate mechanisms to ensure that the Oi Group adheres to the highest and best corporate governance practices.
  • Ample Creditor Support: The Revised Creditor Plan(s) would likely be supported by a majority of Class III creditors for each of the Debtors, allowing the Oi Group to quickly receive creditor approval for the Revised Creditor Plan(s) and minimizing the risk of litigation challenging the plan and respective implementation.
  • Enforceable in All Relevant Jurisdictions: The Revised Creditor Plan(s) are structured to comply with the law of all relevant foreign jurisdictions and would therefore likely receive quick approval in all relevant jurisdictions.

Notwithstanding the disturbing behavior by a majority of the Company’s board of directors at the behest of its minority shareholders exerting control, the Oi Creditor Groups are planning to meet with senior management of the Company and other stakeholders this week in an effort to continue discussions. The Oi Creditor Groups remain committed to working with all stakeholders toward an expedient and consensual restructuring that provides long-term solutions for the Oi Group’s financial and operational issues.

The references to the Revised Creditor Term Sheet and Revised Creditor Plan(s) in this press release are qualified in their entirety by all of the terms, conditions and qualifications set forth in the term sheet, which govern in all respects. The term sheet and plan(s) referenced herein are non-binding on the Oi Creditor Groups, and the terms, conditions, form and structure of implementation of any proposals, plans or agreements will be subject to various customary conditions, including completion of due diligence, all internal and credit committee approvals, negotiation and agreement of acceptable documentation, structuring and implementation of the plans, addressing of key regulatory concerns and judicial confirmation of restructuring plans in all applicable jurisdictions including the Netherlands. The Oi Creditor Groups do not have or assume any fiduciary or other duties to any party. Any transaction arising from the term sheet or plan(s) referenced herein shall be voted on a non-substantively consolidated basis and shall be subject to creditor approval and court confirmation of the plan(s) pursuant to applicable law, including in the Netherlands (including the approval of the Dutch trustees for Coop and PTIF, as necessary for the confirmation of the plan(s)), in the RJ proceedings, and in the U.S. bankruptcy Court, in each case with respect to the applicable Oi Group debtors that are debtors in and subject to the foregoing proceedings. Nothing in this press release shall create any binding legal obligations for any member of the Oi Creditor Groups and it is understood that all such members continue to reserve all rights in connection with any present or future legal proceedings to which they may be parties. This press release is not intended as a solicitation for a vote on any plans or the offer or sale of any security. There can be no assurance that Oi S.A. and its subsidiaries, the members of the Oi Creditor Groups the trustees in the Netherlands, or any other stakeholder will reach agreement on the terms and conditions contained in the term sheet referred to herein or any modifications thereof or any other terms, that any plan(s) will be approved by the courts in all applicable jurisdictions, or that the transactions contemplated by the term sheet referenced herein will be consummated.

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Media Relations:
Ad Hoc Group of Oi Bondholders
CDN Comunicação
Juliana Giancolli
juliana.giancolli@cdn.com.br
+ 55 (11) 3643-2948
or
Nelson Rocco
nelson.rocco@cdn.com.br
+55 (11) 3643-2806
or
Media Relations:
International Bondholder Committee
Brunswick Group
Victoria Ford
Thomas Kamm
Tereza Kaneta
Tel: +55 11 3076 7620
E- mail: oibondholders@brunswickgroup.com

Source: International Bondholder Committee