Article/Intelligence
V.tal Asserts Brazilian Court Order Confirms ‘No Basis’ to Terminate Recognition of Oi SA Chapter 15 Cases, Warns Potential Chapter 11 Filing Would ‘Inject Chaos, Confusion’
Relevant Document:
Notice
V.tal, aka Rede Neutra de Telecomunicações SA, filed a notice today on the Oi SA chapter 15 docket of an Aug. 12 ruling by the Lower Court of the Judicial District of Rio De Janeiro overseeing the debtors’ Brazilian recuperação judicial, or RJ, proceedings.
As previously reported, the RJ court’s Aug. 12 ruling suspended the enforceability of certain obligations under Oi’s recently approved RJ plan and directed the company to prepare a transition plan in case of further financial deterioration or a potential wind-down. In the order, the RJ court says that it is awaiting a report on Oi’s financial condition from a court-appointed watchdog before it rules on the debtors’ proposed amendment to the RJ plan.
Oi is requesting termination of chapter 15 recognition of the RJ proceedings in preparation for a potential chapter 11 filing, which could be used to achieve a “holistic restructuring” to address a severe liquidity crisis that the RJ plan has failed to resolve. Absent a chapter 11 filing, Oi says that it may be forced into a “value-destructive” liquidation in Brazil, known as a falência.
V.tal, an Oi contract counterparty and postpetition lender in the debtors’ RJ proceedings, is opposing the debtors’ termination request. V.tal argues the Aug. 12 ruling confirms that there is “absolutely no basis” to terminate chapter 15 recognition. Citing the debtors’ pending amendment to the RJ plan, V.tal asserts Oi’s assets are still under the Brazilian courts’ jurisdiction.
According to V.tal, a potential chapter 11 filing by Oi would “inject chaos, confusion, and uncertainty into a matter critically important to the country of Brazil.” V.tal insists Oi’s termination motion should be “swiftly denied in furtherance of international comity.”
The Brazilian appellate court overseeing the RJ proceeding issued an order on July 25, recommending that the bankruptcy court refrain from ruling on the termination motion until after the Brazilian court rules on the consequences of Oi’s noncompliance with and requested amendment to its RJ plan.
On Aug. 6, Judge Lisa G. Beckerman denied V.tal’s request to continue the termination hearing until after the RJ court rules on the consequences of Oi’s noncompliance with and amendment to its RJ plan but concluded that the hearing should go forward so that she is prepared to issue a decision on termination after the RJ court issues its ruling.
The evidentiary hearing on the debtors’ chapter 15 termination motion is set to commence tomorrow, Thursday, Aug. 14, at 9 a.m. ET.
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