Elliott Management Corp. is proposing an injection of as much as 9 billion reais ($2.9 billion) into distressed telephone operator Oi SA to restructure its debt and pull it out of bankruptcy protection, according to two people with direct knowledge of the matter.
The plan, which Elliott officials have discussed informally with the company, would be to plow 4 billion reais into the firm for capital investments and up to 5 billion reais to buy back debt from bondholders willing to sell, the people said, asking not to be named because the plan isn’t public yet. Bondholders would also have the option to convert their bonds into equity or into new notes to be issued at a discount of 70 percent of face value with a coupon close to 9 percent, the people said.
If the plan prevails, the current shareholders would be left with 5 percent to 10 percent of the company while Elliott would get a stake of 51 percent or more. The remaining stake, of
40 percent to 45 percent, would be held by bondholders, the people said. Under Elliott’s proposal, Rio de Janeiro-based Oi would postpone all debt payments to banks for five years.
The proposal, which will be made public in the coming days, has already been presented to the company on an informal basis, the people said. Some executives from Elliott are in Brazil this week holding informal talks with creditors, they said.
Officials at Oi and Elliott declined to comment.To get approval for its plan, Elliott will need the support of Oi’s creditors and shareholders. The creditor group with the biggest debt stake, advised by Moelis & Co. and by FTI Consulting Inc., presented its own plan for Oi last month in conjunction with Egyptian billionaire Naguib Sawiris. Cerberus Capital Management, the distressed asset management fund, is also preparing a proposal to be presented to the company, which is separately working on its own recovery plan.