Brazil has had a rough past few months to put it mildly. Ex-president Dilma Rousseff has beensuspended and now faces an impeachment trial, interim president Michel Temer is embroiled in corruption allegations already, the economy is crumbling, and Rio has declared a state of “Public Calamity” putting the Olympic games in question. Now, to add insult to injury, we learn thatBrazil’s fourth largest telephone company Oi SA filed the largest bankruptcy in the country’s history on Monday, Brazil is in need of a mercy rule, even as investors who have been scrambling to buy Brazilian assets in 2016 realize just how bad things really are.
After talks with creditors to restructure its debt collapsed, Oi and six subsidiaries filed for bankruptcy listing $19.26 billion in debt. In its filing, the company said it chose reorganization in order to preserve the value of its holdings and to continue to serve its customers according to the WSJ.
Oi has low penetration in the mobile phone and broadband markets, and Since 2009 the company had accumulated large amounts of debt in order to complete two mergers, first with Brasil Telecom and later with Portuguese company Portugal Telecom. As the WSJ notes, those deals failed to generate enough cash flow to fund the company’s investment needs.
This post was published at Zero Hedge on Jun 21, 2016.
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