Oi Completes Judicial Reorganization With $1.06 Billion Offering

Cleary served as lead international counsel to the steering committee of an ad hoc group bondholders of the Oi Group (steering committee) in the successful completion of the final major stage in Oi S.A.’s judicial reorganization: the issuance of 3.23 million new common shares in a fully backstopped rights offering for R$4 billion ($1.06 billion).

The completion of the rights offering occurred on January 28, 2019, and marks the last major step contemplated in the Oi Group’s reorganization plan, which was previously approved by Oi’s creditors on December 19, 2017, and comes nearly three years after Oi first began engaging with creditors regarding a potential restructuring.

Oi’s successful restructuring of more than $20 billion is the largest private sector restructuring in the history of Latin America and represents an important milestone for the company, as well as for Brazilian capital markets and Brazilian restructuring law.

Cleary, together with Pinheiro Neto Advogados (Brazilian counsel) and Moelis & Co. (financial advisor), served as lead advisors to the steering committee that was instrumental throughout the process in working constructively with the company and ultimately supporting the plan that was approved, as well as throughout the complex implementation phases of the plan during 2018.

The R$4 billion rights offering was fully backstopped by a number of internationally recognized asset managers and financial institutions, including the members of the steering committee, which was critical for reducing the implementation risk of the rights offering and Oi’s overall restructuring. In addition, the Oi Group’s reorganization plan included, among other key features, the conversion of a substantial portion of the Oi Group’s bond debt into a majority of the equity of Oi; the issuance of more than $1.65 billion in new bond debt; the restructuring of all of Oi’s bank debt and portions of claims owed to ANATEL, the Brazilian telecommunications regulator; and key governance and operational reforms aimed at ensuring the long-term viability of the Oi Group. The main features of the plan were first developed by the steering committee more than a year before the reorganization plan was approved.

The Oi Group’s bankruptcy process was particularly complicated because of Oi’s capital structure and business operations. Oi was the first truly public Brazilian company that issued bonds in the international markets to go through a judicial restructuring since Brazil revised its insolvency laws in 2005. In addition, the Oi Group operates in a heavily regulated industry and owed substantial debt to local public and private banks. The Oi Group’s complex debt and capital structure further complicated the restructuring given the number of interested stakeholders, which included competing groups of bondholders with varying claims across the Oi Group, export credit agencies, public and private banks, a regulator with substantial claims, the Brazilian government, and a minority shareholder that staged an attempted hostile takeover of Oi after restructuring proceedings had begun.

Additionally, the cross-border nature of the restructuring led to contested and precedent setting litigation in a number of forums, including Brazil, the Netherlands, and the United States — most notably, the litigation before Judge Sean H. Lane of the United States Bankruptcy Court for the Southern District of New York.