April 3, 2014 / 3:05 PM / 3 years ago

Banks launch Oi's US$10.6bn share offering

NEW YORK, April 3 (IFR) - Brazilian telco Oi has finally launched a share offering of up to US$10.6bn with all of the 14 banks originally mandated for the deal remaining on board despite a row over whether it would be backstopped and even a temporary suspension of the trade.

Roadshows kick off in London on Friday, with pricing and trading earmarked for April 28 and 30 respectively, a senior banker on the deal said on Thursday. The transaction includes 5.75bn shares, as well as a greenshoe and overallotment for what could be up to R$24.22bn, or US$10.6bn.

The capital raise has been very controversial with the underwriters and regulators going back and forth about whether the banks would guarantee the deal, and it was also put on hold last Thursday by the CVM, Brazil's regulator, after CEO Zeinal Bava breached a mandatory quiet period.

While that suspension was lifted earlier in the week, it was still unclear until today about how many banks would stay on board.

As it turns out, all of the 14 that committed to the trade last month, are still involved after regulators relented on demands that they buy up any shares not sold if demand falls short.

Bradesco, Goldman Sachs and Itau had considered backing out, another banker said.

The lead co-ordinators are BTG Pactual, Bank Of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Espirito Santo Investment Bank and HSBC, while BB Investimentos, Bradesco BBI, Banco Caixa Geral, Goldman Sachs, Itau BBA, Morgan Stanley and Banco Santander are joint bookrunners.

The sale will fund the merger between Oi and Portugal Telecom, who have been discussing how to merge since the former bought 25% of Oi in 2010.

The market value of both companies has fallen by more than half over the past three years, a sign that investors were betting on a merger taking place eventually.

The tie-up has been criticized by many Oi shareholders who say the capital increase favors the largest of them, including Portugal Telecom, at the expense of minority investors.

If all goes well, the merger should yield a net present value of pre-tax synergies of R$5.5bn. The new company will have around 100m subscribers and US$19bn in annual revenue.

BTG Pactual is advising Oi on the merger. (Reporting by Joan Magee; Editing by Natalie Harrison)

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