(Recasts lead paragraph; adds bond swap info and bondholder
reaction to plan from 4th paragraph)
By Ana Mano
SAO PAULO, Sept 5 Brazil's largest fixed line
carrier Oi SA on Monday unveiled a debt restructuring
proposal, offering to sell assets and proposing a
debt-for-equity swap option that could mean a 70 percent haircut
Oi filed for protection from creditors on June 20 in the
country's biggest-ever bankruptcy case, involving 65.4 billion
reais ($19.3 billion) in bonds, bank debt and operating
In a securities filing on Monday, Oi offered four payment
options to unsecured creditors such as bondholders owed
approximately 34 billion reais. At the same time, the company
said it is willing to repay secured creditors such as the
Brazil's BNDES development bank in full over the
course of 15 years.
Brazil's Oi offered to exchange up to 32.3 billion reais
($9.90 billion) in unsecured debt for equity under the plan,
which would give lenders up to 85 percent of the company's
capital, according to the filings.
The debt for equity exchange entails issuance of a
convertible debt instrument with face value of 10 billion reais,
Oi said. Creditors will receive voting capital if the company
does not redeem the securities.
"The debt conversion option is by far the worse," a
bondholder told Reuters on condition of anonymity.
In the best case scenario, creditors get paid 31 percent on
their debt, plus 4 percent interest under the plan, he added.
"But if the company does not perform well, creditors get 85
percent of the equity which will be worth zero, not to mention
liabilities to be assumed as a shareholder," he said.
Oi refused to comment on the plan beyond the securities
Creditors willing to commit new funding to help the company
exit bankruptcy will receive priority in their debt repayment
schedule, Oi said. While unsecured creditors will be repaid in
17 years with a seven-year grace period, lenders committing new
financing will be repaid in 10 years.
Unsecured lenders may also choose another repayment option,
with interest payments of at least 8 percent per year for claims
denominated in local currency. Under this option, the principal
on the debt will be settled in 14 semi-annual payments beginning
in the 11th year, according to the filing.
Brazil's Oi also proposed converting about 10 billion reais
of regulatory fines owed to industry watchdog Anatel into
($1 = 3.2637 Brazilian reais)
(Reporting by Ana Mano; Editing by Reese Ewing and Muralikumar