Oi board to meet after sudden resignation of CEO

Alan Burkitt-Gray
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Board of bankrupt Brazilian operator to discuss strategy after Marco Schoeder quits as CEO just two weeks before meeting of creditors

The board of bankrupt Brazilian operator Oi is meeting today to discuss the company’s strategy after the resignation of CEO Marco Schroeder on Friday.

Schroeder left the company just two weeks before a creditors’ meeting that will decide how to extricate the company from its $19 billion bankruptcy.

According to a resignation letter quoted by the Bloomberg news agency he saw “great challenges” ahead and decided he could no longer work with the board. “The most recent meetings of the board of directors have made the necessity of my exit clear,” he wrote, according to the agency.

Schroeder is a former CFO of Portugal Telecom and had a similar role in Oi before the two companies were split. Portugal Telecom is now PT Telecom, owned by Altice. He became CEO of Oi in June 2016, just before the company sought bankruptcy protection.

Anatel, the Brazilian telecoms regulator which is one of Oi’s biggest creditors, must approve any deal to take the company out of bankruptcy.

Among the solutions reportedly being considered for Oi are a merger with TIM Brasil, owned by the former Telecom Italia, and an investment from China Telecom.

Schoeder has worked in the Brazilian telecoms industry for at least 20 years, for much of the time with Oi and its predecessors.

Last year it was revealed that Oi owes Anatel the equivalent of $2.94 billion and state-run banks the equivalent of $2.88 billion, according to an analysis by regional newspaper Folha de São Paulo.

Oi’s main creditors are US securities holders abroad, including Citicorp and BNY Mellon. They are owed a total of $9.95 billion. Oi’s total debt is $19 billion.

Institutions – including Anatel and state banks – related to government account for 30% of Oi’s debts, the paper adds. Only one of the state banks, BNDES, which is owed $968 million, has a loan guarantee. The biggest state-run bank creditor is Banco do Brasil, which is owned $1.29 billion.

The future of Oi was in the balance for some time before it finally went into bankruptcy protection. Bondholders wanted to swap debt for equity, giving them 95% of the company, with existing shareholders having only 5%.

But some board members objected, leaving bankruptcy protection as the only option.

In 2014 Oi was at the centre of a plan to create a transatlantic Portuguese-language operator, including Portugal and Angola as well as Brazil. The company planned to merge with Portugal Telecom but the tie-up met with stumbling blocks such as financial irregularities over the Portuguese operator’s dealings with its largest bank investor, Banco Espírito Santo.

In late 2014 Oi agreed to sell its Portuguese business to French group Altice for €7.4 billion, a deal completed in June 2015.

At one stage Egyptian billionaire Naguib Sawiris was interested in taking Oi over once it is restructured, he told Bloomberg in an interview last year – and Sawiris said that Mikhail Fridman may also be interested. Fridman controls Alfa Telecom, the major investor in Veon.