(Adds details on legal challenge by shareholder, adds context)
SAO PAULO, March 6 (Reuters) - Brazilian telecoms company Oi SA's board has approved the terms of a debt-for-equity swap endorsed by creditors, even as a shareholder said on Tuesday it had won a partial injunction against the plan.
In a Tuesday securities filing, Oi said the board approved the issuance of up to 1,756,054,163 new shares, corresponding to a maximum 12.29 billion reais ($3.81 billion).
Under the deal, unsecured bondholders will be able to participate in the capitalization of Oi by swapping a portion of their debt for shares in the company, as agreed in a restructuring plan creditors approved in December.
Oi, Brazil's largest fixed-line carrier, filed for bankruptcy protection in June 2016, and an 18-month fight between and among shareholders, bondholders, regulators, and state banks ensued.
In December, creditors approved a plan which would give them a significant portion of Oi's equity, and a Brazilian federal judge gave his blessing to the reorganization in January, although many shareholders objected, including Pharol SGPS SA , formerly Portugal Telecom.
Shortly before Oi's announcement, Pharol said its Brazilian subsidiary Bratel SARL had won a partial injunction from Brazil's Market Arbitration Chamber (CAM) to block Oi from implementing the debt-for-equity swap. The penalty for failing to comply is a 122 million-real fine, Pharol said in a statement.
Oi said it believed CAM lacked the authority to interfere with the debt restructuring plan and that the scheme had already been approved by several judicial authorities in Brazil.
"As Oi understands it, the authority to decide on acts regarding the judicial recovery lies with the Seventh Circuit Commercial Court of Rio de Janeiro, whose authority was upheld by the Supreme Court," Oi said in a statement.
Common shares in Oi jumped 4.2 percent to 3.99 reais and preferred shares rose 3.3 percent to 3.80 reais by midday. Brazil's benchmark Bovespa index was up 0.57 percent.
$1 = 3.22 reais Reporting by Gram Slattery and Ana Mano Editing by Susan Thomas