Oi board approves US$2.5bn capital hike

The board of directors of struggling Brazilian telco Oi has approved plans for a capital increase worth 8bn reais (US$2.53bn), as the company moves to have a new reorganization plan passed by investors.

The cash boost still needs to be given the green light by corporate bodies and investors. A decisive general creditors' meeting is expected to take place in September.

The capital increase approval by the board comes a month after being proposed by Oi executives.

"Seeking to improve the financial condition of Oi's balance sheet and the approval of the judicial reorganization plan, the board of directors authorized the board of executive officers to discuss with creditors, potential investors and other stakeholders possible changes to the judicial reorganization plan, so that it contemplates increases in the company's share capital totaling 8bn reais, which have yet to be detailed and are still subject to approval by the relevant corporate bodies," Oi said in a statement.

The goal is that the funds raised will go to the expansion of Oi's investments, focusing mainly on new broadband projects and mobile network coverage, in order to begin a new cycle of investment and expansion for the Brazilian operator, the company said.

Oi also said it will continue to continue negotiating with creditors, potential investors and other stakeholders with respect to its judicial reorganization plan, in order to achieve improvements and enable the approval of the plan at the September creditors meeting.

Only after approval by creditors will the details of the capital increase be outlined.

DEBT TO ANATEL

In related news, the Brazil's federal attorney general's office (AGU) requested that the Rio de Janeiro court overseeing Oi's bankruptcy process recognize that Oi's debt to telecom regulator Anatel is not subject to discussion at the meeting of creditors that will study the operator's reorganization plan.

In June, AGU had already formally challenged the inclusion of Anatel among Oi's debt holders in the bankruptcy process.

If the court agrees with the AGU, Oi's fines from the regulator, worth around 11bn reais, would then not be included in the total debt to be discussed during the negotiations with creditors.

BANK OF AMERICA

Meanwhile, Bank of America announced this week that it raised its stake in Oi to 5.24% of the outstanding shares from 4.72%.

The bank held 7.1mn preferred shares (PN) and 1.1mn Oi ADRs on the US stock exchange on July 13, amounting to 8.2mn shares.

The bank said that the move was solely for investment purposes and that it does not seek a change of control or a change in the management of the operator.