Oi Bankruptcy Sends Shockwaves Through Brazil’s Financial System
The bankruptcy of Oi SA, the largest in Brazil’s history, is reverberating through the nation’s strained financial industry as investors tally the potential hit to creditors.
Even as Egyptian billionaire Naguib Sawiris said he’s prepared to invest in the wireless carrier, Monday’s bankruptcy filing is likely to leave Banco do Brasil SA, Itau Unibanco Holding SA and others with steep losses on their holdings of Oi debt and trigger payments on $14 billion of derivatives contracts that are designed to pay out in an event of a default. Shares of Banco do Brasil slumped 4.8 percent, and Itau dropped 2.2 percent.
The unrelenting two-year recession is wreaking havoc on Brazilian corporations, which have been beaten down by high interest rates, lower commodity prices and a weaker currency. Bankruptcy filings doubled in May to 184 after rising 55 percent last year, according to data provider Serasa Experian. High-profile bankruptcies like that of oil-rig venture Sete Brasil Participacoes SA have forced banks such as Itau and Banco Bradesco SA to dramatically increase their reserves.
Oi sought protection from creditors on 65 billion reais ($19 billion) in debt after failing to reach a restructuring agreement following a long saga of mergers and leadership changes. Brazil’s fourth-biggest wireless company aims to keep serving customers, the company said in a filing Monday. It also filed for Chapter 15 protection in the U.S. on Tuesday.
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http://www.bloomberg.com/news/articles/2016-06-21/oi-bankruptcy-sends-shockwaves-through-brazil-s-financial-system
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