Oi enters into court-supervised reorganization for the 2nd time with debts of BRL 43.7 billion – 03/17/2023 – Market

Oi went into judicial recovery for the second time this Thursday (16), after having the request accepted by the Justice. The request was made at the beginning of the month, less than three months after the announcement of the closure of the company’s first judicial recovery, in December 2022.

In this judicial reorganization, Oi declares to have R$ 43.7 billion in debt. Of these, the amount of R$ 1 billion is class 1, as labor debts are called.

The request was granted by the judge of the 7th Business Court of Rio de Janeiro, Fernando Cesar Ferreira Viana, late on Thursday night.

In a judicial reorganization process, a company can stop paying creditors for some time, but needs to present a plan to settle accounts and continue operating afterwards.

In early February, Oi obtained a precautionary measure in the Rio de Janeiro court that protected the operator, for 30 days, from the blocking of assets by creditors. The company also sought similar protection in the New York court.

In a statement directed to the market at the beginning of the month, Oi said that the request for judicial recovery “proved to be the most appropriate measure for the company and its subsidiaries at this time”.

According to the company, there are ongoing negotiations with creditors and “negotiation points still subject to agreement between the parties”.

“The filing of the request for judicial recovery is a critical step towards the financial restructuring and search for the long-term sustainability of the company and its subsidiaries, and the company reaffirms that it will continue to maintain its activities regularly”, he said.

In case of bankruptcy of the company, the assets are sold to raise money to pay the debts of the company, which ceases to exist.

Oi filed its first request for judicial recovery in June 2016, at the Court of Justice of Rio de Janeiro, after accumulating a gross debt of approximately R$ 65 billion, with more than 55 thousand creditors. The plan was only approved by the Justice in February 2018.

In recent weeks, banks have taken an offensive against Oi in Justice. The movement contested the injunction that protected the company from creditor rescues.

In the view of the banks, the first court-supervised reorganization has not yet been formally completed, as the closing sentence has not yet become final (final stage of the judgment). Therefore, the request for protection would be inconsistent.

On February 15th, Oi came out in defense of its restructuring project. In a note, the company said at the time that it had fulfilled all the obligations of the first judicial reorganization plan. However, he stated that the restructuring process was not complete, requiring additional actions.

As shown to Sheet, a second judicial reorganization is rare, and Oi must encounter more difficulties than in the previous one, according to analysts. This projection is associated with the fact that the company now has fewer assets to sell. Furthermore, a new crisis in a short time would increase agents’ distrust regarding the future of business.