Brazil's Oi proposes 25 percent limit to debt-for-equity swap

The headquarters of the Brazil's largest fixed-line telecoms group Oi, is pictured in Rio de Janeiro, Brazil, June 22, 2016. REUTERS/Sergio Moraes -

BRASILIA/RIO DE JANEIRO (Reuters) - Brazilian phone carrier Oi SA submitted a plan on Wednesday to restructure its 65.4 billion-real ($21 billion) debt burden with a proposal to limit the debt-for-equity swap demanded by creditors to 25 percent of capital.

The plan was delivered to a Rio de Janeiro court and creditors of the largest-ever bankruptcy proceeding in Latin America will vote on it on Oct. 23.

Oi proposes to inject up to 9 billion reais, of which 6 billion reais would come from a stock offering and the rest through the debt-for-equity swap.

The company agreed to raise the company’s annual capital expenditures to 7 billion reais from 5 billion, as previously demanded by creditors.

The conversion of the existing debt would be limited to 25 percent of the company’s capital, but creditors may reach a larger stake in Oi by participating later in the stock offering planned by Oi.

In August, the two largest creditor groups, the International Bondholder Committee and the Ad-Hoc Group of Oi bondholders said they would agree to swap 26.1 billion reais worth of their bond holdings for 88 percent of the company’s equity.

The in-court reorganization began a year and a half ago and has been marked by conflicts between shareholders led by Pharol SGPS SA and Societé Mondiale FIA, bondholders and Brazil’s telecom regulator, Anatel.

Reporting by Leonardo Goy in Brasilia and Rodrigo Viga Gaier in Rio de Janeiro; Writing by Tatiana Bautzer; Editing by Cynthia Osterman and Peter Cooney