(Recasts to add details, comments, background throughout)
By Leonardo Goy
BRASILIA, July 14 Shareholders of Grupo Oi SA
are likely to seek to renegotiate terms of a merger
with Portugal Telecom SPGS SA if the latter's debt
investments with Banco Espírito Santo SA end up in
default, Brazilian Communications Minister Paulo Bernardo said
Shareholders of Oi, which include state development bank
BNDES, could also seek to change the stakes that partners would
have in the combined company in a default, Bernardo said. But he
said he does not believe a planned merger of Oi and Portugal
Telecom is at risk.
Recent disclosures of financial irregularities at
family-held holding companies behind Banco Espírito Santo SA,
Portugal's largest listed bank, have raised questions about
potentially destabilizing losses at the bank and other companies
in the family's orbit. One of those holding companies faces the
repayment of almost 850 million euros ($1.16 billion) in debt on
"There's a transaction that matures tomorrow. If the money
comes back, it's fine. If it doesn't come back, it's evident
that BNDES and the other partners will revisit terms of the
merger and their stakes in the combined company. This situation
certainly badly hurt one of the partners," Bernardo said.
Bernardo's comments indicate that the situation is far from
becoming a political issue, with Brazil's government expecting
both Portugal Telecom, Oi and their shareholders to find a
solution to the impasse.
Bernardo told reporters in Brasilia that he requested from
Anatel, the telecommunications industry watchdog, additional
information on Portugal Telecom and to monitor how the situation
Last week, Oi, which controls Brazil's fourth-biggest
wireless carrier, and BNDES, a major sponsor of the merger,
lashed out at Portugal Telecom for not disclosing a debt
investment in Rioforte, a company controlled by the Espírito
Santos that is under investigation in Luxembourg over liquidity
The representatives of two key Oi shareholders quit Portugal
Telecom's board at the start of the month, when Portugal
Telecom's 897 million euro investment in Rioforte came to light.
Portugal Telecom's two debt investments in Rioforte, which
are equal to roughly 40 percent of the telecom firm's market
value, mature this week. The merger has been touted as a chance
to strengthen Oi's corporate governance after years of bickering
between minority and controlling shareholders.
On Friday, Luciano Coutinho, president of BNDES, told
reporters in São Paulo that the merger is unlikely to collapse
as a result of the Portugal Telecom investments in Rioforte,
which might lead both companies to rework the terms of the deal.
(Writing and additional reporting by Guillermo Parra-Bernal;
Editing by Chris Reese and Cynthia Osterman)