(Adds details throughout on CEO’s comments, earnings)
By Gram Slattery and Brad Haynes
SAO PAULO, Nov 13 (Reuters) - Debt-laden Brazilian telecoms provider Oi SA could benefit from a third-party capital injection, but the company should focus on talks between creditors and shareholders before engaging new strategic investors, its chief executive said.
In a Monday interview regarding third-quarter results, CEO Marco Schroeder said he thought it was “extremely important” that a long-delayed creditors meeting be held on Dec. 7 even if creditors and shareholders had not reached an agreement.
In the results, Oi reported a net profit of 8 million reais ($2 million) in the third quarter, compared with a net loss of 1.214 billion reais a year earlier, as a stronger currency reduced the burden of its dollar-denominated debts.
Oi, Brazil’s fourth largest carrier, filed for Latin America’s largest ever bankruptcy protection process last year to restructure 65 billion reais in debt.
Many firms without a significant stake in the carrier have proposed injecting capital into Oi in return for equity, with TPG Capital Management LP and state-run China Telecom Corp Ltd being the latest to do so.
“I think it’s not a good moment to have this conversation,” Schroeder said. “We have to overcome the matter of the recovery plan before really engaging more intensely with those groups.”
The next deadline for the recovery plan is a vote at the Dec. 7 creditors assembly.
“I think it’s extremely important to hold the creditors meeting on Dec. 7, even if it’s not conclusive,” he said. “People start to talk, they start to put their ideas forth.”
If the meeting does take place, and creditors vote against the plan, Oi runs the risk of being liquidated. Still, Schroeder said that possibility is “practically non-existent” as private bondholders would lose almost everything in that scenario.
Oi’s third-quarter net profit, following a string of quarterly losses over the past two years, was helped heavily by currency effects. Almost $9 billion of Oi’s debt is dominated in U.S. dollars, which lost ground against the Brazilian real last quarter.
Oi also kept up a cost-cutting drive. Quarterly operating expenditures dropped 7.2 percent from the same period a year earlier to 4.321 billion reais, and operating expenses year-to-date have dropped 1.5 billion reais.
Still, earnings before interest, depreciation, taxes, and amortization (EBITDA) fell 2.4 percent to 1.605 billion reais, underscoring the need fresh capital to keep Oi competitive.
$1 = 3.29 reais Reporting by Gram Slattery and Brad Haynes; editing by Grant McCool and Tom Brown