The revised plan is likely to be presented to the telecommunications company within weeks, said the people, who asked not to be identified because the strategy isn’t public yet. The proposal aims to provide a middle ground between the factions tussling for the upper hand in Oi’s future, including debtholders, shareholders and government regulators, the people said.
Elliott offered last year to invest as much as 10 billion reais ($3.1 billion) in funds earmarked for debt repayment and investment at Oi, people familiar with the matter said in October. Oi said Oct. 5 the talks ended without a firm offer from the New York-based fund. Elliott is working with Lazard Ltd. as an adviser, one of the people said.
Oi and Elliott declined to comment. Lazard didn’t immediately respond to requests for comment.
Elliott is one of several parties considering an investment in Oi, which is under bankruptcy protection with about $19 billion in debt. The Rio de Janeiro-based company said in a December filing it signed a confidentiality agreement with Cerberus Capital Management, the U.S. private equity firm that specializes in distressed investing. Elliott earlier agreed to similar confidential terms, two of the people said.
Bondholders began jockeying for position in a restructuring even before Oi filed for bankruptcy protection in June. A group of bondholders advised by Moelis & Co., with backing from Egyptian billionaire Naguib Sawiris, presented a plan in December to swap 24.8 billion reais in bond debt into a 95 percent equity stake in the company and to inject $1.25 billion in new capital. That proposal favors the steering committee of the Moelis-advised group at the expense of others, said Corrado Varoli, chief executive officer of G5 Evercore, which is advising a rival group of bondholders with members such as Aurelius Capital Management.
Oi’s own restructuring plan, presented in September, has met resistance from creditors because it doesn’t let them immediately convert debt into equity.
Elliott is positioning itself as a potential partner for Oi with experience in distressed debt deals throughout Latin America and elsewhere, as well as across telecommunications, three of the people familiar with the matter said. Singer’s New York-based firm famously won a fight with Argentina over repaying its sovereign debt, and over the years has been an investor in telecom companies from MCI to Telecom New Zealand to Kabel Deutschland.
Started by Singer in 1977, Elliott manages almost $30 billion, including long-short hedge funds, distressed credit, arbitrage, real estate, shareholder activism, and private equity.