Oi settles legal dispute with Pharol

Oi settles legal dispute with Pharol

Brazil’s Oi has resolved its legal clash with shareholder Bratel and will now look to restructure, having initially requested bankruptcy protection in June 2016.

Last March, the majority of Oi’s shareholders agreed to have their outstanding debts repaid in the form of equity stakes in the operator. Bratel’s parent firm, the Portugese telecommunications group Pharol, objected to the offer and took out an injunction to prevent the repayment plan, while also threatening to sue Oi for €2 billion.

In a recent filing however, Oi stated that Bratel has agreed “for the termination and extinction of any and all judicial and extrajudicial litigation in Brazil, Portugal and all the various countries where there are ongoing discussions involving companies of the two groups. Oi’s management and Pharol are in good faith aligned as to Oi’s best interests, so that the company may focus entirely on its operational turnaround and eliminate the distractions and costs relating to litigation.”

Under the agreement, Oi will buy back 33.8 million shares from Pharol for €25 million, and agrees to “assume costs with judicial guarantees related to legal proceedings of Pharol in Portugal”. On its end, Pharol will “use a minimum of €25 million in the subscription of the capital increase – new resources provided for the company in its judicial reorganisation plan”.

Pharol will be required to vote in favour of the plan at Oi’s general shareholders meeting; Oi retains the right to select a member of Pharol’s board of directors to perform this duty. The filing notes that “failure to implement this right is a condition for termination of the agreement.”

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