Suspended fines-for-investment deal is new hurdle for Brazil's Oi

The Brazilian federal audit court (TCU) has suspended its assessment of an agreement inked between troubled Brazilian operator Oi and telecoms regulator Anatel, which would allow the carrier to swap 3.2bn reais (US$1bn) in administrative fines for investments, local press reported.

The agreement, backed by the agency's conduct adjustment term (TAC) program, was approved by Anatel's board in May, exactly one month before Oi filed for bankruptcy proceedings.

The operator filed for bankruptcy protection on June 20 in what is considered Brazil's largest-ever bankruptcy process, involving some 65.4bn reais (US$20.3bn) in bonds, financial debt and related liabilities.

Members of the TCU and even some officials at Anatel have questioned whether the operator would be able to commit to such significant investments while struggling with heavy debts and working to settle an agreement with creditors to ride out bankruptcy.

Anatel has been criticized by not taking into consideration Oi's financial capabilities when negotiating the TAC, since the company's debts and the deterioration of its finances were made public.

TCU's ruled to suspend assessment of the deal until the mediation committee set up by the Rio de Janeiro courts, as part of the bankruptcy proceedings, decides whether or not the fines are part of the debt load due to be paid by the company within the bankruptcy process.

For its part, Anatel says it will not sign the TAC with Oi until creditors vote on the restructuring plan presented by the carrier.