November 29, 2016 / 11:41 AM / a year ago

Brazil's Oi says Dutch units may enter bankruptcy proceedings

SAO PAULO (Reuters) - Brazilian phone carrier Oi SA said on Tuesday that Dutch judicial authorities could compel bankruptcy proceedings for its two Netherlands-based units, which hold most of the company’s bond debt.

Oi said in a securities filing that it hoped that a bankruptcy process in the Netherlands, should it take place, would have no meaningful bearing on its own bankruptcy court procedures in Brazil.

Should the Dutch units enter bankruptcy proceedings, Oi said in a securities filing that it hoped that would have no meaningful bearing on its own bankruptcy court process in Brazil.

Oi, Brazil’s No. 4 wireless carrier, last June sought Brazilian court protection for 65.4 billion reais ($19 billion) in obligations, of which about 34 billion ($10 billion) is in bonds.

About 25 billion reais ($7.35 billion) of the bonds are held by the two Dutch entities - Oi Brasil Holdings Coöperatief U.A. and Portugal Telecom International Finance BV (PTIF), according to company data.

Currently, the Dutch units have “suspension of payments” legal standing -- which protects a company from creditors and gives it time to reorganize.

“Dutch judicial administrators could require the conversion of two suspension of payments procedures ... into bankruptcy processes,” Oi’s security filing said.

If bankruptcy is declared, the assets of a company may be liquidated to repay creditors, according to Rotterdam, Netherlands-based law firm LVH-Advocaten.

The price on PTIF’s 5 percent note due in November 2019 rose 2 cents on the dollar to 27 cents, the biggest intraday gain since mid-June.

Rio de Janeiro-based Oi did not specify what conditions would lead the two Dutch units to enter the bankruptcy procedure. However, Tuesday’s filing noted that the potential bankruptcy of the units in the Netherlands does not affect operational activities or Oi’s cash position in Brazil.

However, the company said it hoped that prospect in the Netherlands “does not result in significant impacts on the bankruptcy process day by day on the company in Brazil.”

In the filing, Oi also said it will start to settle claims in Brazil worth up to 50,000 reais, aiming to help small creditors get repaid. Reuters reported on Nov. 3 the company’s intention to repay small-sized supplies ahead of financial creditors.

Reporting by Ana Mano; Editing by Guillermo Parra-Bernal and W Simon

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