Brazilian minister says Oi-Portugal Telecom merger may be renegotiated in the event of debt default

15 Jul 2014

Reuters reports Brazilian Communications Minister Paulo Bernardo as saying yesterday that shareholders of local telecoms operator Oi SA may seek to renegotiate the terms of a merger with Portugal Telecom (PT) should the latter’s debt investment with Banco Espirito Santo result in a default. Bernardo went on to say that Oi’s shareholders – including state development bank BNDES – could look to amend the proportional stakes held by each partner, should a default occur, although he stressed that he does not think the planned merger of the two companies is at risk.

The development comes amid recent revelations suggesting possible financial irregularities within some family-held holding companies that back Banco Espirito Santo – Portugal’s largest listed bank. The allegations have sparked concerns the bank, and the aforementioned holding companies, may suffer significant ‘destabilising’ losses. ‘There’s a transaction that matures tomorrow. If the money comes back, it’s fine. If it doesn’t come back, it’s evident that BNDES and the other partners will revisit terms of the merger and their stakes in the combined company. This situation certainly badly hurt one of the partners,’ Bernardo is quoted as saying.

Brazil, Portugal, Oi, Pharol (formerly Portugal Telecom SGPS [PT SGPS])