| BASIS OF PRESENTATION | 1.
BASIS OF PRESENTATION
Oi S.A. - Under Judicial Reorganization – Debtor-in-Possession
The Company is headquartered in Brazil, in the city of Rio de
Janeiro, at Rua do Lavradio, 71 – 2º andar.
The Company also holds: (i) through its wholly-owned
subsidiary Telemar Norte Leste S.A. - Under Judicial Reorganization
– Debtor-in-Possession Debtor-in-Possession
The local and nationwide STFC long-distance concession agreements
entered into by the Company and its subsidiary Telemar with ANATEL
are effective until December 31, 2025. These concession
agreements provide for reviews on a five-year basis and in general
have a higher degree of intervention in the management of the
business than the licenses to provide private services, and include
several consumer protection provisions, as perceived by the
regulator. On December 30, 2015, ANATEL announced that the
review to be implemented by the end of 2015 had been postponed to
April 30, 2016. Subsequently, On April 29, 2016, ANATEL
decided, under a Resolution Circular Letter, to postpone until
December 31, 2016 the execution of the revised
agreements. On December 30, 2016 and under a Resolution
Circular Letter, ANATEL postponed again the execution of the new
concession agreements up to June 30, 2017. On June 29,
2017, ANATEL informed, in an official letter, that it would no
longer make any further amendments to the concession agreements at
this instance. Note that until the end of the concession agreement
on December 31, 2025 there would still be a period for
revision, on December 31, 2020. It is worth noting that
Congress Bill 79/2016 provides for a special amendment of
concession agreements to adjust them to the possibility of
migrating from a public utility regime to an STFC service provision
under a private law regime. Thus, if this bill is passed into law,
the concession agreement is subject to amendment in any date other
than December 31, 2020. Throughout the years, ANATEL initiated
some procedures aiming at monitoring the Company’s financial
situation, as well as to assess the Company’s ability to
discharge its obligations arising from the terms of the concession
agreements. In light of the approval of the Judicial Reorganization
Plan by the creditors and its subsequent ratification by the
competent court, ANATEL started to monitor the Oi Group
Companies’ operating and financial positions based on the
effectiveness of said Judicial Reorganization Plan (JRP).
The Company is registered with the Brazilian Securities and
Exchange Commission (“CVM”) and the U.S. Securities and
Exchange Commission (“SEC”). Its shares are traded on
B3 S.A. – Brasil, Stock Exchange, OTC, and its American
Depositary Receipts (“ADRs”) representing Oi common
shares and preferred shares traded on the New York Stock Exchange
(“NYSE”).
1.1.
JUDICIAL REORGANIZATION
On June 20, 2016, Oi, together with its direct and indirect
wholly owned subsidiaries Oi Móvel, Telemar, Copart 4
Participações S.A. – Under Judicial Reorganization
- Debtor-in-Possession Debtor-in-Possession Debtor-in-Possession Debtor-in-Possession
On November 29, 2017, the Judicial Reorganization Court determined
once again the postponement of the General Creditors Meeting
(“CGM”) to December 19, 2017, on its first notice to
convene, which may continue on December 20, 2017, if necessary, and
February 1, 2018, on its second notice to convene, which may
continue on February 2, 2018, if necessary.
On December 19, 2017, after confirming that the required quorum of
classes I, II, III, and IV creditors was in attendance, the CGM was
held and the JRP was approved by a vast majority of creditors on
December 20, 2017.
On January 8, 2018, the Judicial Reorganization Court issued a
decision ratifying the JRP and granting the judicial reorganization
to the Oi Companies. Said decision was published on
February 5, 2018, initiating the period for the creditors of
the Judicial Reorganization Debtors (“JR Debtors”) to
elect one of the payment options to recover their claims, as
provided for in the JRP, which ended on February 26, 2018,
except for bondholders, whose deadline was extended to
March 8, 2018, as decided by the Judicial Reorganization Court
on February 26, 2018.
On July 20, 2018, the Board of Directors ratified in part the
Capital Increase – Claim Capitalization, approved at the
Board of Directors’ meeting held on March 5, 2018. This
approval was provided after verification of the results of the new
common shares’ subscription calculation by the
Company’s shareholders, which exercised their preemptive
right and by the holders of the Qualified Bondholders’
Unsecured Claims through the capitalization of their related
claims, as provided for by the JRP.
Under Brazilian law, prior to issuing the Common Shares underlying
the newly issued Common ADSs or the Warrants underlying the newly
issued ADWs to holders of Defaulted Bonds, Oi was required to
conduct a preemptive offer of those Common Shares and Warrants to
all holders of its Common Shares and Preferred Shares. Holders of
Common ADSs and Preferred ADSs were not entitled to participate in
that preemptive offer.
Holders of preemptive rights were entitled to subscribe to Common
Shares and the associated Warrants during a subscription period
commencing on June 15, 2018 and ending on July 16, 2018 at a
subscription price of R$7.00 per Common Share. Holders of Common
Shares and Preferred Shares subscribed for 68,263 Common Shares and
5,197 Warrants in the preemptive offer. The cash proceeds of the
preemptive offer was required to be made available to holders of
Defaulted Bonds in lieu of the subscribed Common Shares and
Warrants.
Under the JRP, the Qualified Recovery with respect to each US$1,000
of Qualified Bondholder Credits consisted of approximately:
•
US$195.61 aggregate principal amount of New Notes;
•
38.57 Common ADSs representing 192.83 Common Shares
for a total of 1,514,299,603 shares valued at $10,600,097,221 in
partial settlement of the bonds;
•
2.75 ADWs; and
•
US$0.01 in cash.
In the July 28, 2018 Board of Directors meeting, the Board ratified
the issuance of subscription warrants to subscribers who
participated in the preemptive offering and to qualified
Bondholders pursuant to the terms of the Capital Increase –
Claims Capitalization.
Pursuant to Article 72 of the Bylaws then in effect and because of
a dilution of Company’s shareholding base in excess of 50% as
a result of the Capital Increase – Claim Capitalization, the
voting constraint therein was discontinued and immediately and
irrevocably ceased to have any effect with respect to the exercise
of voting rights by the Company’s shareholders.
On July 31, 2018, the Company that it had completed the
restructuring of the Companies under Reorganization with the
implementation of the applicable JRP terms and conditions
represented by the completion of the Capital Increase – Claim
Capitalization.
1.2.
CAPITAL INCREASE – NEW FUNDS
As part of the approved JRP, on October 26, 2018, the Board of
Directors approved the Capital Increase – New Funds, within
the authorized capital ceiling set in Oi’s Bylaws, through
the issuance of three billion, two hundred twenty-five million,
eight hundred six thousand, four hundred fifty-one (3,225,806,451)
new common shares, at the price of R$1.24 per share (“New
Common Shares”), for total consideration of R$4.0 billion, in
line with the JRP provisions. Any holder of Company common shares
(“Common Shares”) and/or Company preferred shares
(“Preferred Shares”), including the custody agent of
the American Depositary Shares Program (“ADSs
Custodian”) representing Company Common Shares and/or Company
Preferred Shares (“ADS”), is ensured the preemptive
right to subscribe New Common Shares issued as a result of the
Capital Increase – New Funds, pursuant to Article 171 of Law
6404/1976. Any and all New Common Shares not subscribed by existing
common and/or preferred shareholders under their preemptive rights
are to be subscribe by the Backstop Investors pursuant the
deadlines and terms of the Commitment Agreement between the Company
and the Backstop Investors. The preemptive rights were eligible to
be exercised upon effectiveness of the U.S. SEC registration
statement the Company filed relating to the sale of New Common
Shares and ADS. The SEC declared the registration statement
effective on November 13, 2018, upon which the Company disclosed a
Notice to Shareholders communicating the start date of the
preemptive right exercise period, as well as other terms and
conditions.
Also on October 26, 2018, the Company became aware that the
members of ANATEL’s Board of Directors unanimously decided to
grant a preapproval of the Capital Increase – New Funds.
Between October 3 and December 31, 2018, 115,913,355 common shares
have been issued to pursuant to the exercise of warrants that were
issued as part of the Capital Increase – Claims
Capitalization transaction, including subscription warrants
represented by 22,798,378 American Depository Warrants. On January
4, 2019, 275,985 common shares have been issued to pursuant to the
exercise of warrants that were issued as part of the Capital
Increase – Claims Capitalization transaction, including
subscription warrants represented by 55,197 American Depository
Warrants. The Subscription Warrants not exercised up to and
including January 2, 2019 and the ADWs not exercised up to and
including December 26, 2018 have expired and can no longer be
exercised.
On December 19, 2018, the Company noticed to Holders of ADSs
informing that it changed certain terms of the Rights Offer. The
Company entered into an amendment to the Commitment Agreement,
under which the Backstop Investors holders of 60% of the total
amounts of the backstop commitments (“Majority of the
Backstop Investors”) agreed to extend the deadlines and waive
certain pending conditions precedent to finance its backstop
commitments, including the requirement to publish the updated
General Universal Service Targets Plan (“New PGMU”).
The Company also informed that it will pay to the ADS Depository
the ADS issue rate of the New Common ADSs. As a result, the Deposit
Amount of the New Common ADSs would no longer be used to pay the
ADS issue rate, which would increase the portion returned to the
holders of Common ADSs Rights exercised its Common ADSs Rights to
subscribe the initial New Common ADSs or New Common ADSs
Surpluses.
On January 11, 2019, the Company’s Board of Directors
verified and confirmed the issuance of 1,530,457,356 New Common
Shares that were subscribed within the preemptive right exercise
period of new common shares, at the issue price of R$1.24 per
share, for total proceeds of R$1,897,767,121.44. From the total of
New Common Shares issued, (i) 856,519,080 were delivered to the ADS
Depositary so that the ADSs corresponding to such New Common Shares
were issued, which were delivered to the holders of ADSs to
exercise their preemptive rights, and (ii) 673,938,276 New Common
Shares were delivered to the holders of common shares and preferred
shares that exercised their respective preemptive rights.
On the same date, the Company’s Board of Directors verified
the result of the requests regarding the excess distribution of new
common shares (“Excess New Common Shares”) not
subscribed within the preemptive right exercise period of new
common shares. The holders of common shares and preferred shares,
including the ADS Depository, requested a total of 91,322,933
excess distribution shares. The Company’s Board of Directors
also confirmed that because the number of Excess New Common Shares
requested was lower than the total number of Excess New Common
Shares available, the Excess New Common Shares requests filed by
the holders of common shares and preferred shares and the holders
of ADSs would be fully met.
On January 21, 2019, the Company’s Board of Directors
verified the payment of the Excess New Common Shares and confirmed
the issue of 91,322,933 Excess New Common Shares subscribed by the
holders of common shares and preferred shares, including 49,156,560
Excess New Common Shares subscribed by the ADS Depository pursuant
to the instructions received from holders of ADSs, at the issue
price of R$1.24 per share, which resulted in the contribution of
R$113,000,000.00 to the Company. On the same date, the
Company’s Board of Directors confirmed that the 1,604,268,162
New Common Shares not subscribed within the preemptive right
exercise period and the subscription of Excess New Common Shares
would be subscribed by the Backstop Investors, under the terms of
the Plan and the Commitment Agreement. Also on the same date, the
Company’s Board of Directors verified that the Backstop
Investors representing 84.4% of the total guarantee commitment of
the Capital Increase – New Funds elected, under the terms of
the Plan and the Commitment Agreement, to receive the guarantee
commitment premium de commitment of the Capital Increase –
New Funds in common shares, as provided for by Section 5 of
the Commitment Agreement, and approved, therefore, in strict
compliance with the Plan and the Commitment Agreement confirmed in
court, the issue of 272,148,705 shares (“Commitment
Shares”).
On January 28, 2019, the Company informed that, in compliance
with the Plan and the terms of the Capital Increase – New
Funds, on January 25, 2019 1,604,268,162 New Common Shares
were subscribed and paid in, corresponding to the balance of common
shares not subscribed by the shareholders within the preemptive
right exercise period and the Excess New Common Shares period
(“Balance of New Common Shares”). This concluded the
Capital Increase – New Funds, provided for by Clause 6 of the
Plan, through the subscription and payment of all 3,225,806,451 New
Common Shares issued as part of the Capital Increase – New
Funds, representing a contribution of new funds for the Company
totaling R$4,000,000,000.00. The Company also informed that, in
strict compliance with the Plan and the Commitment Agreement, the
Backstop Investors that elected to receive their commitment premium
in shares, as provided for by Clause 6.1.1.3 of the Plan and the
Commitment Agreement, subscribed and paid in the Commitment Shares,
issue price of R$1.24 per share, in the form of American Depositary
Shares. In light of the outcome of the subscription and payment of
the New Common Shares issued as part of the Capital Increase
– New Funds and the Commitment Shares, the Company’s
paid-in paid-in
1.3.
CREDITORS SETTLEMENT PROGRAM
On June 23, 2017, as authorized by the Judicial Reorganization
Court, the Company initiated a program to enter into settlement
agreements with the Oi Companies’ creditors listed in the
Judicial Administrator’s List of Creditors, published on
May 29, 2017 (“Oi Creditor” and “Creditors
Settlement Program” or “Program”, respectively),
and creditors could join the program via the website
www.credor.oi.com.br
The Creditors Settlement Program was applicable for creditors with
claims amounting to R$50,000 or lower, and allowed the prepayment
of 90% of the claim on the acceptance of the creditor and the
remaining 10% of the claim after the approval of the JRP, to be
paid under the terms and conditions of the Creditors Settlement
Program. A Oi Creditor whose claim was higher than R$50,000 would
be entitled to join the Creditors Settlement Program, in which case
they would receive a R$50,000 prepayment, upon acceptance by such
Oi Creditor of the settlement under the terms and conditions set
out in the Creditors Settlement Program and the exceeding amount
will be paid as set out in the Plan. The Creditors Settlement
Program benefited the participating Oi Creditors as it allowed for
the prepayment of part of the amount under the Program.
Approximately 35,000 creditors jointed the Creditors Settlement
Program, of which about 30,000 in Brazil and 5,000 in Portugal, and
approximately R$360 million were made available for the
prepayment of the settlements entered into under the Program.
1.4.
PRE-PETITION CLAIMS, REGULATORY AGENCIES
The Company has reported that it has knowledge of regulatory
punitive administrative proceedings and lawsuits that could amount
to approximately R$14.5 billion as at June 30, 2016,
including fines imposed, expected fines to be imposed and
corresponding monetary variations. The Company disagreed and
challenged a material portion of the noncompliance events pointed
out by ANATEL and challenged the disproportionateness of the
punitive actions taken, emphasizing their unreasonableness.
The JRP, as approved at the CGM on December 20, 2017 and
subsequently ratified by the Judicial Reorganization Court on
January 8, 2018, lays down the payment method Pre-petition non-tax
(i)
Payment of nontax pre-petition st th st th st th st th th
Because the other nontax pre-petition
Note, however, that ANATEL filed interlocutory appeal No. 001068-32.2018.8.19.0000
Accordingly, the court decisions in effect establish that
ANATEL’s non-tax Pre-petition
1.5.
PAYMENT PROPOSALS IN THE JRP APPROVED AT THE CGM ON
DECEMBER 20, 2017, RATIFIED BY THE JUDICIAL REORGANIZATION COURT ON
JANUARY 8, 2018 AND IN EFFECT BY DECEMBER 31, 2018
The Oi Group’s creditors shall become creditors of the
debt(s) issued by the JR Debtor that was their original debtor.
CLAIMS FROM CREDITORS
This section presents a summarized version of the key terms of the
repayment Plan to Oi Group Creditors, including certain information
on the financial terms and conditions included in the JRP.
Note that, as defined in Appendix 1.1 to the JRP, the publication
date of the Judicial Reorganization Court’s decision
ratifying the JRP, i.e., the lower court decision granting the
judicial reorganization, against which no appeal with a suspensory
effect is upheld, which is January 8, 2018, published on the
Official Gazette on February 5, 2018, is taken into
consideration for purposes of the way the time limit in the payment
terms is counted.
According to the approved JRP, there are 4 Classes of creditors, as
follows:
Class I – Labor Claims
General rule: labor claims shall be paid in five (5) equal
monthly installments, with a 180-day six-month
Labor Claims that are collateralized by judicial deposits:
•
Shall be paid through the immediate withdrawal of the
amount deposited in court.
•
If the deposited amount is lower than the debt listed
by the Oi Companies, the deposit shall be used to pay part of the
debt and the outstanding balance shall be paid after a decision is
issued by the Court that ratifies the amount due in five
(5) equal monthly installments, with a 180-day
Labor Claims not collateralized by judicial deposits shall be paid
via judicial deposits attached to the court records of the related
case.
Fundação Atlântico (pension fund) claims:
•
Payable in six (6) annual, equal installments,
with a five-year grace period as from the Court Ratification of the
Plan.
•
Interest/monetary variation: five-year grace period
for interest. National Consumer Price Index (INPC) + 5.5% per year,
levied as from the Court Ratification of the Plan, annually accrued
during the grace period and payable annually, as from the sixth
year, together with the principal installments.
Class II – Collateralized Payables
Class 2 claims shall be paid as follows:
Each creditor shall receive the original debt amount, as disclosed
in the List of Creditors, adjusted by the interest/monetary
variation rate, as follows:
Principal shall be repaid as follows:
•
72-month
•
Principal shall be repaid in 108 monthly installments,
as described in the table below:
Months
Percentage of the amount to be
0 a 72 nd 0.0%
73 rd nd 0.33%
133 rd th 1.67%
180 th 1.71%
•
Four-year grace period on interest.
Interest: Long-term Interest Rate, released by the Central Bank,
plus spread of 2.946372%, where the interest levied in the first
four (4) years shall not be paid and shall be accrued annually
and added to the principal.
Classes III and IV – Unsecured Creditors and
MBOs/SBs
The payment proposal for claims of Unsecured Creditors and
Micro-business Owners (“MBOs”) and Small Businesses
(“SBs”) is described below, according to the thresholds
established in the JRP:
Linear payment to Unsecured Creditors:
•
Linear payment to Unsecured Creditors: Unsecured
Creditors’ and MEs/EPPs’ claims of amounting up to
R$1,000 were paid in a single installment within 20 business days
after the Court Ratification of the Plan.
•
Unsecured Creditors and MEs/EPPs with claims above
R$1,000 can elect to receive their claims in a single installment,
providing that they agree to receive only R$1,000 as the full
payment of their claims an related costs, payable within 20
business days after the end of the period to elect the payment
option.
Unsecured Creditors with Judicial Deposits:
Claim Amount Interval Discount %
Up to R$1,000.00 0%
R$1,000.01 to R$5,000.00 15%
R$5,000.01 to R$10,000.00 20%
R$10,000.01 to R$150,000.00 30%
Over R$150,000.00 50%
•
Shall be paid through the withdrawal of the deposited
amount;
•
If the deposit is lower than the debt (after the
discount above, as applicable), the deposit shall be used to pay
part of the debt and the outstanding balance shall be paid after a
decision issued by the competent court that ratifies the amount due
according to the General Payment Method described below;
•
If the deposit is higher than the debt (calculated
after the discount above, as applicable), The Oi Companies shall
withdraw the difference.
Unsecured Creditors and MEs/EPPs that are not paid as provided for
above can opt for payments using one of the five restructuring
options described below, limited to a maximum amount per offer.
Restructuring Option 1:
•
Part of Classes 3 and 4 claims shall be denominated in
Brazilian reais by the amount of Classes 3 and 4 Creditors that
elected this option, up to a ceiling of R$10,000,000,000; these
Creditors can elect one of the following methods: (i) claim
restructuring; (ii) private debentures, or (iii) public
debentures.
•
Part of Classes 3 and 4 claims shall be denominated in
US dollars by the amount claimed of Classes 3 and 4 Creditors that
elected this option, up to a maximum of US$1,150,000,000.
•
60-month
•
Principal shall be repaid in 24 semiannual, successive
installments, as shown in the table below:
Six-month
Percentage of the amount to be six-month
0 to 10 th 0.0%
11 th th 2.0%
21 st rd 5.7%
34 th 5.9%
•
The interest rate shall be (i) an annual rate
equivalent to 80% of the interbank deposit rate (CDI) for
claims denominated in Brazilian reais and (ii) 1.75% per year for
claims denominated in US dollars; interest shall be annually
accrued to the principal and paid semiannually as from the
66 th
•
Once this offer’s maximum amounts are reached,
the outstanding balances of the claims payable under this offer
shall be paid according to the General Payment Method described
below.
Restructuring Option 2:
•
The claims of the Creditors that elect this payment
method shall be restructured in US dollars within up to six
(6) months after the Court Ratification of the Plan, limited
to a maximum of US$850,000,000.
•
60-month
•
Principal shall be repaid in 24 semiannual, successive
installments, as shown in the table below:
Six-month
Percentage of the amount to be six-month
0 to 10 th 0.0%
11 th th 2.0%
21 st rd 5.7%
34 th 5.9%
•
Interest of 1.25% per year, annually accrued to the
principal and paid semiannually as from the 66th month after the
Ratification of the Judicial Reorganization Plan, where:
•
During the principal grace period, 10% of total
interest shall be paid semiannually, while the remaining 90% shall
be accrued to the principal annually. After this period, 100% of
total interest shall be paid semiannually.
•
Once this offer’s maximum amounts are reached,
the outstanding balances of the claims payable under this offer
shall be paid according to the General Payment Method described
below.
•
The creditors’ rights granted under this offer
can only be assigned with the prior consent of Oi.
Restructuring Option 3:
Restructuring of unqualified bonds:
•
This offer is available only to bondholders with
claims up to US$750,000, and it is limited to a maximum of
US$500,000,000.
•
50% discounts, firstly applied to interest and
subsequently to principal.
•
Grace period on principal: six years as from the
Ratification of the Plan.
•
Principal shall be equivalent to 50% of the
unqualified bondholders’ claims, capped at US$250,000,000,
and shall be repaid in twelve (12) semiannual, successive
installments, as shown in the table below:
Six-month
percentage of the amount to be six-month
0 to 12 th 0.0%
13 th th 4.0%
19 th rd 12.66%
24 th 12.70%
•
Interest: 6% per year in US dollars, annually accrued
to the principal as from the 78 th
Restructuring of qualified bonds:
•
This offer is available only to bondholders with
claims in excess of US$750,000, which will receive the
following:
•
Common shares issued by Oi and currently held by
PTIF;
•
New notes;
•
New I Common Shares; and
•
Subscription Warrants
•
Exchange ratios: for each US$664,573.98:
•
9,137 common shares issued by Oi and currently held by
PTIF;
•
New Notes, issued at the overall price of US$145,262,
which consists of a par value of US$130,000 and an issue premium of
US$15,262;
•
119,017 New I Common Shares;
•
9,155 Subscription Warrants.
Note: the exchange ratios assume that the number of Oi common
shares and Oi preferred shares is 825,760,902.
•
The New Notes shall be issued in US$1,000 multiples
and shall have a maximum par value of R$6,300,000,000, equivalent
to a maximum par value of US$1,918,100,167.
•
Maturity: 7 th
•
Principal: shall be repaid in a bullet payment
maturing on the 84 th
•
Interest: can be paid under one of the following two
methods:
•
10% per year, paid semiannually; or
•
During the first three (3) years as from the
plan’s ratification, 12% interest paid semiannually, of which
8% of the annual interest paid is in cash semiannually and 4%
compounded semiannually and paid in the 36 th th
•
The New I Common Shares shall be due as a result of
the capital increase, through the capitalization of the claims:
•
Up to 1,756,054,163 New I Common Shares shall be
issued with par value ranging from R$6.70 to R$7 to a total ranging
from R$11,765,562,892.10 to R$12,292,379,141.
•
Subscription warrants: Oi shall issue up to
135,081,089 subscription warrants.
On June 13, 2018, ANATEL agreed with the restructuring of the
qualified bonds, in Decision No. 336/2018, authorizing the
stages necessary for the capital increase of the other actions
required for complying with Clause 4.3.3.2 of the JRP.
Specifically, the authorized conversion entailed the issue of new
shares, the dilution of the current shareholders’ interests,
the capital increase, and the change of the Company’s current
shareholding structure. ANATEL ratified the determination of any
change in the Company’s Board of Directors that must be
previously submitted to the Regulator’s review.
On June 18, 2018, the Superintendent General of the
Administrative Economic Defense Council (“CADE”)
(Brazilian antitrust authority) decided, under SG Order
No. 753/2018, not to acknowledge the qualified bonds’
restructuring transaction, which had been cautiously notified to
said authority exclusively to ensure the compliance with JRP within
the prescribed deadlines. According to the CADE Superintendent
General, the transaction was not acknowledged because it did not
meet the revenue requirement prescribed by Law 12529/2011. No
complaints were filed against this decision.
With the confirmation of the CADE’s decision and taking into
account ANATEL’s Steering Board’s decision that granted
the preapproval requested by the Company to complete the capital
increase provided for by Clause 4.3.3.2 of the JRP, all the
conditions precedent listed by the Plan, needed to undertake said
capital increase, were either verified or waived, considering that
the related conversion of debt into equity instruments was
implemented after the ratification of the JRP, on February 5,
2018.
Restructuring Option 4: General Payment Method
This offer applies to creditors that do not meet the terms and
conditions of the previous offers or if the offers highlighted
above exceed their maximum amounts and the creditor still holds an
outstanding balance.
•
Principal shall be repaid in five (5) equal
annual, successive installments after the 20-year
•
Interest/monetary variation:
•
Interest equivalent to TR, a benchmark rate, per year
in the case of unsecure claims whose holders elect to receive
payment for their claims in Brazilian reais; this interest shall be
levied as from the Court Ratification of the Plan, and total
interest and monetary variation accrued in the period shall be paid
only and together with the last principal installment.
•
No interest, in the case of unsecured claims whose
holders elect to receive payment for their claims in US
dollars.
•
The Company shall have an early repayment option
consisting of the payment of 15% of principal and accrued
interest.
•
Payment maximum: R$70,000,000,000, minus the amount of
pre-petition
Restructuring Option 5: Strategic Supplier Creditors
•
The claims of Strategic Supplier Creditors, suppliers
of goods and/or services that kept the terms and conditions
practiced prior to the filing of the Judicial Reorganization Plan,
that do not arise from loans or financing facilities granted to the
Oi Companies, shall be paid, up to a maximum of R$150,000, within
up to 20 business days after the end of the period to elect the
payment option.
If these suppliers have claims in excess of R$150,000, they shall
receive the outstanding amount minus a 10% discount in four
(4) equal annual, successive installments, plus (i) TR +
0.5% in the case of real-denominated claims and (ii) 0.5% per year
in the case of US dollar- or euro-denominated claims.
CLAIMS FROM RELATED PARTIES
Claims that refer to intragroup loans among the JR Debtors, by
using cash generated by transactions conducted in the international
market by the JR Debtors, shall be paid as described below:
•
Principal shall be repaid beginning on the
20 th
•
Interest/monetary variation: TR for real-denominated
intragroup claims 0.5%, levied as from the Court Ratification of
the Plan. Total interest and monetary variation accrued in the
period shall be paid only and together with the last principal
installment. No interest, in the case of dollar- or
euro-denominated intragroup claims.
The Oi Companies may mutually agree an alternative method for the
settlement of intragroup claims, under the originally agreed terms
and conditions, including, but not limited to, by netting their
payables and receivables, as provided for by the law.
CASH SWEEP
Unsecured Creditors, MEs/EPPs, and Secured Creditors can accelerate
the receipt of their claims against the Oi Companies with the cash
sweep, which shall be proportionally distributed among the claims,
under the following terms:
•
In the first five (5) years after the Court
Ratification of the Plan, the Oi Companies shall assign the
equivalent to 100% of the net revenue from the sale of assets that
exceeds US$200 million.
•
Beginning on the 6 th
•
The Minimum Cash Balance is defined as the higher
of:
(i)
25% of the aggregate of prior year’s OPEX and
CAPEX; or
(ii)
R$5 billion.
•
Additionally, any funds originating from a capital
increase shall be added to the calculation of the Minimum Cash
Balance.
CAPITAL INCREASES – NEW FUNDS
Pursuant to the shareholders’ preemptive right and fulfilling
or waiving the conditions precedent provided for in the Backstop
Agreement or the JRP, the Company was required to make a Capital
Increase – New Funds totaling R$4,000,000,000.
The Issue Price of the New II Common Shares was calculated by
dividing R$3,000,000,000 by the number of Oi shares outstanding on
the business day immediately prior to the capital increase, taking
into consideration possible adjustments provided for in the
Backstop Agreement.
Taking into consideration the terms and conditions of the Backstop
Agreement, a commitment fee of 8% in US dollars or 10% in Company
common shares was due to the investors identified in the Backstop
Agreement that committed to promptly provide or obtain firm
commitments for the full subscription of the capital increase, as
established in said Backstop Agreement. On January 25, 2019,
272,148,705 Common Shares have been issued in a private placement
to the Backstop Investors and paid US$13 million to the Backstop
Investors as compensation for their commitments under the
Commitment Agreement.
FURTHER OBLIGATIONS AND OTHER RELEVANT
SITUATIONS:
Restriction to Dividend Payments
The JR Debtors shall only distribute dividends to their
shareholders as follows: (i) u |
