November 28, 2017 / 2:51 PM / a year ago

UPDATE 1-Brazil regulator bars Oi's "ruinous" restructuring plan

(Adds context, share performance)

By Gram Slattery and Tatiana Bautzer

SAO PAULO, Nov 28 (Reuters) - Brazilian telecoms regulator Anatel has forbidden telecoms operator Oi SA from reaching a deal with creditors to implement its most recent restructuring proposal, warning of its "ruinous potential for the company," the company said on Tuesday.

Oi said its board had finalized a new plan to restructure some 65 billion reais ($20.17 billion) of debt in bankruptcy court, but Anatel had blocked the board from officially signing any documents with creditors to enforce the new plan, according to securities filings.

The decision marks an escalation of the regulator's role in Latin America's biggest-ever bankruptcy case, as the threat of full-blown intervention hangs over protracted and so far fruitless talks between creditors and shareholders.

The abrupt resignation of Oi Chief Executive Marco Schroeder on Friday, just two weeks ahead of a crucial creditor vote, heightened tensions and raised questions about Anatel's next steps. In October, the regulator threatened to intervene in the carrier if there was change in management, but backed off after assurances from shareholders.

In recent months Schroeder, replaced by legal officer Eurico Teles Neto, had urged shareholders and creditors to make concessions, while the board stuck to a restructuring proposal rejected by major bondholder groups.

Both the company and creditors are growing pessimistic about a solution being reached before a Dec. 7 creditor meeting, a person with direct knowledge of the matter told Reuters this week. Creditors and shareholders are still too far from reaching a consensus, the source said, asking for anonymity due to the sensitivity of the issue.

Anatel board member Leandro Euler said on Tuesday that the regulator had identified clauses in the company's latest plan that generated uncertainties about whether there would be an injection of fresh capital in the debt-laden carrier. The agency was not setting a deadline for new adjustments, he added.

Oi also said in a filing that Brazilian antitrust watchdog Cade would now have the right to attend any Oi board meetings.

Oi's board, which filed for bankruptcy protection 17 months ago, presented a restructuring plan earlier this month that major private creditors publicly rejected. At the time, Anatel said it should have the opportunity to review the plan before it could be officially filed with a bankruptcy court, and the regulator then ordered changes.

Oi common shares were up 1.5 percent at 4.41 reais in Tuesday trading in Sao Paulo and have risen 61 percent this year. ($1 = 3.22 reais) (Additional reporting by Leonardo Goy; Editing by Frances Kerry and Jonathan Oatis)

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