Oi creditors to vote on restructuring despite shareholder complaints

By Rodrigo Viga Gaier

RIO DE JANEIRO (Reuters) - Creditors of Oi SA began gathering in Rio de Janeiro on Tuesday to vote on a plan to take the Brazilian telecoms operator out of bankruptcy protection, despite a flurry of legal actions by a key shareholder trying to stop the vote.

By mid-morning, creditors in Latin America's largest-ever bankruptcy case started trickling into the 22,000-square-meter RioCentro convention center. The company, which spent some 2 million reais ($600,000) on the meeting, had readied the facility twice before, but was forced to break down the temporary infrastructure when court battles and creditor fights delayed previous votes.

This time, however, Oi's management appeared likely to win over enough support from creditors to restructure some 65.4 billion reais in debt after a year and a half of contentious talks.

Major bondholders have already expressed support for the plan, which could give them control of the company through a debt-for-equity swap. Still, some creditors such as state development bank BNDES, whose support is required for passage, have been more circumspect.

To complicate matters, influential shareholder Nelson Tanure, whose investment vehicle Societe Mondiale controls the board through alliances, has been peppering courts and regulators with complaints for days after a judge effectively removed him from negotiations.

At stake in the process, which has been plagued by infighting among creditors, shareholders and management, is the sole fixed line carrier in over 2,000 of the country's 5,000 municipalities and the employer of over 100,000 Brazilians.

Under the restructuring plan, bondholders such as distressed asset specialists Aurelius Capital Management and Goldentree Asset Management can trade their debt for up to 75 percent of the carrier's capital. Investors will also inject 4 billion reais of fresh capital.

In recent days, Societe Mondiale has filed petitions with Brazil's solicitor general, the national telecoms regulator and Rio courts, among other bodies. Among their allegations is that a late November move by a judge to remove the board from the debt negotiating process was illegal.

They also complain that the plan will not sufficiently capitalize Oi. Shareholders had previously proposed plans with cash injections of up to 5.5 billion reais.

If the petitions do not result in a last-minute delay, creditors will meet at 11 a.m. local time (1300 GMT). The meeting is expected to last for several hours and could spill over to Wednesday.

($1 = 3.29 reais)

(Reporting by Rodrigo Viga Gaier; Writing and additional reporting by Gram Slattery; Editing by Cynthia Osterman and Chizu Nomiyama)