SAO PAULO – A Brazilian federal judge gave his blessing on Monday to a proposed reorganization of Oi, the country’s top fixed-line telephone operator, which declared bankruptcy in June 2016.
Though he signed off on the plan, which was approved last month by Oi’s creditors, Judge Fernando Cesar Ferreira imposed some conditions, including the elimination of an annex that called for reimbursing creditors for costs they incurred in trying to collect.
Complying with the annex would undermine efforts to put the company back on its feet, the magistrate wrote.
Oi sought bankruptcy protection in June 2016, sparking 18 months of litigation that led ultimately to last month’s accord with creditors, seen as the only way of preventing liquidation or a government takeover of the firm.
The company owes 64 billion reais ($20 billion) to roughly 55,000 creditors, ranging from employees to major banks that lent money to Oi.
The elevated indebtedness stems from a botched 2013 merger with Portugal Telecom, a tie-up that effectively unraveled when Oi sold Portuguese assets it had acquired from PT to Luxembourg’s Altice.
Under the recovery plan, creditors will receive 75 percent of Oi shares in exchange for writing off half the debt.
At the same time, creditors and shareholders will be asked to inject $1.25 billion in new capital, while Oi also contemplates raising another $781 million from capital markets.
Oi, with Brazil’s biggest fixed-line network, is the country’s fourth-leading mobile operator and is also a provider of broadband Internet and cable television.
Serving some 50 million people in all, Oi is the No. 3 telecommunications company in Latin America.