Telecom firm Oi files for second bankruptcy protection

Brazilian telecom company Oi filed its second request for bankruptcy protection on Wednesday, just three months after informing the market it had completed its previous recovery process.

In the new filing, the company says it has debts of BRL 43.7 billion (USD 8.4 billion), including BRL 1 billion in labor debts.

The new request is no surprise to the market. In early February, Oi obtained an injunction from a Rio de Janeiro court that froze the assets of its creditors for 30 days. The company also filed a request for bankruptcy protection in New York courts.

Banks questioned Oi’s injunction, alleging that the first recovery plan has yet to be formally concluded as there is still no final sentence from the court recognizing its closure. This would render the second bankruptcy protection request inconsistent.

If approved, the second process would be more difficult than the first, analysts say, as the company has no more assets to sell — a crucial step to reduce expenses and raise funds to pay off debts. Moreover, the trust of creditors and investors has been seriously shaken in recent years.

Oi filed its first request in June 2016 — by then, it was the largest-ever bankruptcy case in Brazil’s history, with almost BRL 65 billion in debts and more than 55,000 creditors. A recovery plan was approved in 2018.

To restructure itself, the company had to divide its assets into five mobile production units (UPIs) sold over the last three years. In February last year, antitrust watchdogs greenlit the sale of its mobile operations, which took place in December 2020.

The company seemed to be fine in the first quarter of 2022, with financial debts standing at BRL 33.4 billion according to earnings reports. However, factoring in the proceeds from the sale of its assets, their executives stressed at the time, debt would fall by 42 percent to only BRL 19.1 billion. 

The results for the first quarter of 2023 will be released on March 23. The total debt informed in the second bankruptcy protection request, however, shows the company’s relief was short-lived, and the situation deteriorated again throughout 2022.

The company had been trying to negotiate with creditors, as demonstrated by notices about extrajudicial attempts on the company’s investor relations page. As it failed to reach an agreement with at least half of its creditors, Oi had to go to court for the second time.

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