For creditor banks, Oi’s new recovery is illegal and perpetuates default – 02/14/2023 – Market

Banco do Brasil, Caixa Econômica Federal and Bradesco challenged in court the precautionary measure that protected Oi against early redemptions of its debt, obtained two weeks ago as a step towards requesting a new judicial recovery.

They allege that the company’s first court-supervised reorganization, which ended in December, was not formally completed, as the closing sentence has not yet become final (final stage of the trial). For this reason, they say, the company would not be entitled to ask for new judicial assistance.

They also question the possibility of granting successive legal aid to the same company and ask for recognition of the incompetence of the 7th Business Court of Rio de Janeiro, which granted protection, to judge the contestations.

For Caixa and Banco do Brasil, a new recovery would allow the company to “continue imposing on its creditors loss after loss, default after default, even forcing its perpetuation in the market in an unnatural way”.

“What will prevent the company from, two years from now, requesting a fourth consecutive judicial reorganization — as an addition to the plan, as done in the past — and imposing new and increasingly serious damages on creditors?”, they question.

“Judicial recovery is not a lottery ticket, which can be used successively by the entrepreneur in crisis, but a remedy destined to those who effectively have economic viability and sufficient competence to explore economic activity”, says Bradesco.

In a strategy similar to that adopted by Americanas, Oi claimed in the request for judicial protection that it is unable to deal with debts of almost R$ 30 billion and that it lives “imminent risk of irreparable damage”.

“Unfortunately, several unpredictable, uncontrollable factors, and its current economic and financial situation made it essential to resort to judicial protection to implement a new stage of its restructuring and guarantee the preservation of the company, as a great generator of jobs and income”, he said.

The disputes from Banco do Brasil and Caixa argue that the crisis in the company began while the company was still in judicial recovery and, therefore, there is no need to talk about a new recovery.

The use of the instrument as a “negotiation moratorium”, say the pieces delivered by the two banks, “has severe impacts on pricing and on the supply of credit in the market”.

“It cannot be accepted that a company, with such serious signs and evidence of insolvency, makes such abusive use of the judicial recovery institute, whose purpose is to preserve the national economy, especially with regard to the credit market.”

The banks point out that the company has already obtained an amendment to the judicial recovery process. They claim, therefore, that a new bailout would be the third.

In addition to asking for the suspension of the precautionary measure of protection, they ask for the recognition of the incompetence of the 7th Federal Court of Rio de Janeiro to judge the case, given the alleged impossibility of a second judicial recovery.

“Clearly, a company cannot live all the time in recovery, and taking advantage of the benefits of recovery”, says Gabriel de Britto Silva, a lawyer specializing in business and consumer law. “If recovery is permanently necessary, it is because it is not useful to achieve the objective of making the company recover, bankruptcy should be imposed as the only measure”.