The country’s two largest private banks filed applications with the courts of Rio de Janeiro on Tuesday (11) against the bankruptcy of Grupo Oi, which was announced on Monday (10). The defense of Bradesco and Itao, who are among the company’s largest creditors, believes that the company’s management would not have implemented the plan stipulated in the judicial recovery and that bankruptcy would have been hasty.
“The failure to fulfill the obligations stipulated in the judicial recovery plan occurred, for example, as a result of the failure of the management of Grupo Recuperando to dispose of the isolated production units (UPIs) in a timely manner,” say Bradesco’s lawyers, from the offices of SOB and Machado Meyer. The bank has R$49 million to receive from the company.
UPIs are mechanisms used in judicial recoveries to separate parts of a business that are undergoing restructuring. In Oi’s case, it includes operating broadband services via fiber optics.
The banks also claim that given Aoi’s size and public contracts, which include the armed forces and the judiciary, a bankruptcy would be more harmful to society than a judicial recovery.
“The argument is that bankruptcy generates an immediate loss of value and that it would be wise to attempt a controlled restructuring. Selling assets via UPI is very profitable and guarantees security for the buyer,” says Vitor Anthony Ferrari, Mazzucco e Mello’s business restructuring partner.
According to the defenses, the sale of 7,877 properties registered in the name of Oi and its subsidiaries, worth about R$ 5.8 billion, would be one of the alternatives to continue scheduled payments and avoid bankruptcy.
Corporate interests, tangible assets, court deposits, credit rights and amounts associated with arbitration proceedings were also mentioned with an estimated total value of between R$20 billion and R$50 billion.
“Although the Group (Oi) faces significant difficulties resulting from high debts and restrictions on its cash flows, the recent procedural moves demonstrate the existence of sufficiently large assets to ensure the continuity of business operations and the implementation of the judicial recovery plan,” reads the petition filed by Itaú, also represented by SOB. The bank has R$2 billion to receive from Oi.
According to a report issued by the judicial director in October, the company has debts of about R$45.5 billion with external creditors. In 2012, the company recorded an average monthly revenue of R$2 billion (about R$4 billion adjusted for inflation).
The bankruptcy decision was issued by the Seventh Business Court of the Court of Justice of Rio de Janeiro after the telecommunications company submitted an application for recognition of insolvency last Friday (7).
Judge Simon Gastesi-Shivrand’s decision cites additional bankruptcy liabilities (debts incurred after the recovery began) of R$1.7 billion, monthly revenues of R$200 million and empty assets as evidence that the company is in bankruptcy.
According to Ferrari, the banks’ appeal failed to address the company’s ultimate operational and financial incapacity, which was recognized by the court.
“The request for suspensive effect serves, essentially, to try to preserve part of the credit, but it does little to resolve the structural framework, to protect the position of senior creditors and without resolving the economic reality of the case, which seems much more negative than the value to be preserved, being another attempt, now by the creditor, to maintain a process that has proven unsustainable over the years,” says the lawyer.
About The Author
