Brazilian Oi: Justice decrees the end of judicial recovery after more than 6 years

By Felipe Moreira

The 7th Business Court of the Court of Justice of Rio de Janeiro decreed, this Wednesday (14), the end of the judicial recovery process of the telephone operator Oi.

According to Judge Fernando Viana, the company complied with all obligations assumed in the process. The publication of the decision, which must be communicated to Anatel and the Public Ministry, must be within 20 days.

“The most impactful and relevant judicial recovery process of the Brazilian judiciary has come to an end, and one of the most complex cases in the contemporary legal world”, said the judge in the decision.

On Oi’s side, the offices of Basílio Advogados, Barbosa Müssnich Aragão (BMA) and Rosman, Penalva, Souza Leão, Franco, Vale Advogados participated in the recovery process.

Created to be a national “supertele”, Oi filed for judicial recovery in 2016 after accumulating R$65 billion in debt with 55,000 creditors. Since then, tele has managed to approve a recovery plan, which was later modified, including more asset sales, discounts on payments to creditors and extension of terms.

This process was scheduled to end in October 2021, but received approval from creditors to extend until May 2022 due to its complexity. At the time, however, the court set the March date, which now ended up not being fulfilled either.

The judicial reorganization process should have ended in the first quarter of this year, but ended up being postponed due to questions from creditor banks and rivals Claro, Vivo and TIM for adjustments after the sale of the Oi Móvel (mobile) operation. The questions were denied by the court.

More recently, Justice approved the auction of a new group of fixed operation towers, for R$1.697 billion, to Highline. The sale of Oi TV (DTH base and equipment) was authorized through a direct sale to Sky, which made a proposal of R$786 million. That sale, however, was not completed.

The company carried out an extensive agreement with creditors program (PAC), for the mediation of debts of up to R$50,000. According to the judge, 85% of creditors fit into this category. A second program was completed with 7,907 agreements and R$61.475 million mediated. This made it possible to extinguish “thousands of lawsuits”. There was a third program, for the more than 68,000 procedural incidents, of which at least 20,790 resulted in settlements.

“With the end of the judicial reorganization, and composition of its billionaire debt, the national telecom giant enters today its new phase, focused on modern digital services, with the perspective of being an important generator of cash and jobs, of relevant social action – diametrically opposite situation when the recovery started, when the debt accumulated the vertiginous level of R$65 billion”, wrote Viana in the decision.

With regard to the qualifications and objections pending judgment, according to the judge, the closure of the judicial reorganization does not mean to bring any damage to the creditor who has not yet had his case judged, insofar as the normal procedures will be carried out before this Court, regardless of of this decision.

“What is not admissible, under penalty of perpetuating the process, is that the judicial recovery proceeds until all challenges and credit qualifications are decided, whose volume of distribution in the present recovery exceeded the house of 64,000 procedures”, he concluded.

HISTORY AND CHALLENGES AHEAD

The emergence of Oi is one of the consequences of the privatization policy of Telebrás, in 1998, followed by the aggregation of private companies that started to hold the fixed telephony concession in the following years. The movement was boosted by funds from the National Bank for Economic and Social Development (BNDES) as an incentive for the creation of a national supertele.

This policy, however, turned out to be disastrous after the series of acquisitions that took billionaire liabilities into Oi, as occurred in the incorporation of Brasil Telecom and Portugal Telecom. Tele also suffered from the loss of revenue due to the decreasing use of fixed telephony and the need to invest in the formation of mobile networks – which ended up being sold this year to its rivals TIM, Vivo and Claro, for R$16.5 billion. Subsequently, the companies asked for part of the money they paid back to Oi.

One of Oi’s biggest challenges ahead is the legal discussion with the National Telecommunications Agency (Anatel) for the review of fixed-line maintenance obligations. The company is also in businessworking with creditors to rearrange the payment of commitments relating to a remaining gross debt of approximately R$22 billion.

Judge Fernando Viana recalled that market solutions to remedy Oi extend beyond the period of judicial supervision. “It is not the purpose of the recovery process to check whether the debtor will fulfill all obligations contracted in the plan or whether he will be able to escape the crisis that affects him”, he ponders. “The concept of this action is to facilitate transparent and balanced negotiation between the debtor and its creditors, an objective that was successfully achieved in this process.”

Viana attested that Oi had fulfilled so far all the obligations set forth in its judicial reorganization plan – which was also attested by the Public Prosecutor’s Office and by the judicial administrator of the process, Wald Advogados.

With information from InfoMoney/ Estadão