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Banks Set to Buy Around 15% of Oi Telephone Network

02/07/2014 - 08h33

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JULIO WIZIACK
FROM SÃO PAULO

A group of twelve banks, both Brazilian and foreign, are set to buy between R$6 billion and R$8 billion (USD $2.5 billion to $3.4 billion) in shares of the new telecommunications company comprised of the Brazilian company Oi, and Portugal Telecom.

The merger was formed last year.

This amounts to around 15% of the new company, which will have shares with voting rights in the stock exchanges of São Paulo, New York and Lisbon. However, this will occur only after the injection of funds determined by the merger agreement.

The investment promised by the banks is part of this process, which will come to a conclusion in April, Folha has learned.

Credit Suisse, Banco Espírito Santo, Merrill Lynch, Barclays and BTG Pactual are the banks leading the group. They have committed to providing most of the funds, to the tune of around 12% each.

Itaú, Bradesco, Citibank, Santander, Votorantim, Banco do Brasil and the Portuguese bank Caixa Geral de Depósitos will contribute smaller amounts.

The twelve institutions provided "firm guarantees" to Oi that the company would receive up to a potential R$8 billion (US$ 3.4 billion).

However, this commitment does not necessarily signify financial outlay, as the banks will seek investors interested in becoming Oi shareholders.

In the event the banks do not find enough investors to cover all of the costs, they will pay the difference and become shareholders themselves, according to their contribution to the group.

RECOVERY

The architect of the deal is Oi's president, Zeinal Bava, who has influence with the world's principal investment banks.

When in charge of Portugal Telecom, Bava held an event which attracted investors holding a total of more than USD $1 trillion in shares, including in his own company.

Many consider Bava the man to clean up Oi. His primary objective is to reduce the company's debt of more than R$30 billion (USD $12.6 billion), and create a fund for investments.

If this occurs, the company would once again be able to compete with Telefónica, the owner of Vivo; Claro, the Mexican telecommunications giant owned by the billionaire Carlos Slim; and TIM, which may be sold by Telecom Italia in order to reduce its debt.

With R$6 billion (USD $2.5 billion), Oi would fulfill its capitalization of R$14 billion (USD $5.9 billion), the result of its merger with Portugal Telecom.

However, there were doubts that Oi would come good. Even the Brazilian government - via the National Bank of Economic and Social Development - refused to raise any more funds for the company, of which it is a partner.

The message was clear: Oi had to find a market solution to its problems.

Translated by TOM GATEHOUSE

Read the article in the original language

Marcelo Sayão - 16.jul.2008/Efe
A group of twelve banks are set to buy around 15% of Oi telephone network
A group of twelve banks are set to buy around 15% of Oi telephone network

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