Blog Post
Octus on Credit: Oi SA moves forward with controversial strategy for parallel Chapter 11 Brazilian insolvency proceedings
Simon Schatzberg, LatAM Reporter
Brazilian telecommunications company Oi SA is taking an unconventional approach to address its ongoing financial troubles, seeking to dismiss its U.S. bankruptcy recognition case to clear the way for a new Chapter 11 filing.
Oi has been struggling with insolvency for nearly a decade. The company first entered Brazilian bankruptcy proceedings (called “recuperação judicial” or RJ) in 2016, didn’t emerge until December 2022, then had to file again just months later. While their second bankruptcy plan was approved and gained U.S. court recognition last year, Oi has recently failed to meet some of its plan obligations.
Here’s where it gets complicated: Brazilian law only allows companies to file for bankruptcy once every five years, so another Brazilian filing isn’t an option. Instead, Oi wants to pursue a parallel strategy—maintaining its Brazilian proceedings while also filing for Chapter 11 protection in the U.S. But there’s a catch: under U.S. bankruptcy law, companies with existing Chapter 15 recognition – which acknowledges foreign bankruptcy proceedings – can only cover their U.S.-based assets in a Chapter 11 case. To access broader protections, Oi first needs to close its Chapter 15 recognition—which is what they’re trying to do.
V.tal, a key lender in the Brazilian proceedings, is fighting back, arguing that running parallel bankruptcy cases in both countries would create “chaos, confusion, and uncertainty” in a matter of critical importance to Brazil’s economy.
This week, Judge Lisa G. Beckerman directed both parties to participate in court-supervised mediation in Brazil, signaling that resolution may require coordination between the two countries’ legal systems.
This case highlights the complex challenges multinational companies face when navigating bankruptcy across different legal systems—and how creative legal strategies sometimes emerge when traditional options are exhausted.
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