Aurelius leads forming of dissident Oi bondholder group: source

November 14, 2016 9:25 AM EST

The headquarters of the Brazil's largest fixed-line telecoms group Oi, is pictured in Rio de Janeiro, Brazil, June 22, 2016. REUTERS/Sergio Moraes


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By Ana Mano

SAO PAULO (Reuters) - New York-based Aurelius Capital Management is behind the formation of a dissident bondholders group at Brazil's Oi SA that emerged last week, a source with direct knowledge of the matter said on Monday.

The new group will also soon announce a financial adviser to handle negotiations with the debt-laden Brazilian carrier, which filed in June for the country's largest-ever bankruptcy to restructure about $19 billion of liabilities, the same source said.

New York-based Houlihan Lokey is one of the firms vying for the role of financial adviser to the group, but no decision has been made, said the source.

This is the second group of Oi bondholders formed to negotiate collectively with the company. The addition of a second group will add complexity to the carrier's debt restructuring talks, which the Brazilian government has already made clear it wants to influence in a way that ensures the company's survival.

Aside from inter-creditor issues, industry watchdog Anatel is closely monitoring the carrier, and it recently banned two board members representing an activist minority shareholder claiming they were influencing decisions without formal regulatory approval.

The second bondholder group said last week that investors representing $1.5 billion of the face amount of Oi bonds want "to construct a viable operational and reorganization plan" for Oi. Most investment firms in this group own bonds issued by Oi's two Netherlands-based finance subsidiaries, Portugal Telecom International Finance BV and Oi Brasil Holdings Cooperatif UA.

Aurelius, Houlihan Lokey and law firm Dechert LLP, legal advisers to the new bondholder group, did not respond to requests for comment.

SAWIRIS BID

The first organized bondholder group to attempt to negotiate collectively with the carrier is being advised by New York-based Moelis & Co., which is working with Egyptian billionaire Naguib Sawiris to present an alternative reorganization.

However, Moelis' investor base shrank to about $4 billion of face amount of Oi bonds, said a second source with direct knowledge of Moelis' strategy, after two investors owning about $400 million of the bonds left the original group to negotiate alongside Aurelius in the dissident group.

Calling Oi's own reorganization plan "a non-starter," the source said the only plan Moelis-led bondholders will approve is one introducing "an immediate debt-for-equity conversion."

The Moelis-led group rejected Oi's original reorganization plan presented on Sept. 5 that would impose a 70 percent haircut on unsecured claims, including on Oi's bond debt, and a potential equity conversion only after three years.

Reuters reported on Oct. 21 that the Egyptian billionaire plans to make an equity investment of $1.5 billion to take control of the ailing carrier.

(Editing by Jeffrey Benkoe and Cynthia Osterman)



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