Creditors of Oi SA, the Brazilian phone company that filed for bankruptcy with $20 billion of debt, view the restructuring plan the company presented on Monday as unfairly benefiting shareholders, Bloomberg News reported yesterday. The main issue is the right Oi has to redeem bondholders’ convertibles anytime it wants. Creditors argue that the option for early redemption gives current shareholders power to avoid dilution if the company manages to stage a turnaround, but leaves bondholders with a large stake if things go badly. The Rio de Janeiro-based operator proposed converting up to 32.3 billion reais ($10.1 billion) of bondholders’ debt into convertible bonds with a face value of 10 billion reais. Lenders would get 85 percent of the company if Oi doesn’t pay off the debt in three years — leaving current shareholders in control of the company for that time span, and potentially benefiting from any recovery. The creditors also oppose the 10-year grace period suggested for bank debt, considered too long, and the option shareholders have of using proceeds from asset sales to pay bondholders’ convertibles, which could avoid dilution.
