Bankruptcy filing by Brazil's Oi rattles global supply chain

Thu Jun 23, 2016 5:53pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Brad Haynes and Ana Mano

SAO PAULO, June 23 (Reuters) - Brazil's biggest bankruptcy filing ever is sending shockwaves far beyond the recession-hit country's borders as operator Oi SA seeks creditor protection from global telecoms suppliers and export banks around the world.

Oi is seeking protection on over 500 million reais ($150 million) of accounts payable to international providers from Nokia Corp and Ericsson to IBM Corp and Alcatel-Lucent SA, according to court documents reviewed by Reuters.

The biggest Brazilian fixed-line carrier also owes about $1 billion to foreign development banks in China, Finland, Canada and Germany, which encouraged exports to Brazil during a recent surge in spending on wireless and broadband networks.

That cycle came crashing to a close this week with Oi's record bankruptcy filing in a Rio de Janeiro court, punctuating the broader slump in a sector curtailing investments to protect profits amid Brazil's worst economic recession since the 1930s.

While those debts to suppliers are dwarfed by more than 17 billion reais in bank loans and some 34 billion reais in bonds, they may create headaches for equipment and service providers already struggling with slumping investments in the country.

"The focus is on keeping the company working. That's what everybody wants," said a source close to the company. "Obviously you don't want to affect suppliers, but that has to be discussed in court."

Oi has refrained from making public comments while the judge in Rio evaluates its petition.

The company was expected to be the only telecom group in Brazil to raise capital spending this year, Credit Suisse Securities analysts said last month in a note that forecast an end to the industry's recent investment cycle driven by fourth-generation mobile technology.   Continued...