FAQ on Judicial Reorganization’s Closing

Closing of the Judicial Reorganization Process

Grupo Oi informs that the Judgment of the 7th Corporate Court of Rio de Janeiro ended, by sentence, its judicial reorganization process initiated in 2016 and conducted by that Judgment.

This was one of the largest court-supervised reorganization processes in the country and an emblematic example for the transparency and way of conducting the relationship between creditors and the company through the judicial process. Its complexity and importance in the Brazilian market ended up, in a way, making it a reference for other similar processes and a starting point for the revision of current legislation. As it should be, the closure of this Judicial Reorganization attests to Oi’s compliance with all obligations set forth in the Judicial Reorganization Plan approved by the Creditors and ratified by the JR Court.

As of its closure, the Company will proceed with the execution of its Strategic Plan, as well as with the fulfillment of the remaining obligations of the Judicial Reorganization Plan, exploring all available alternatives to restore its sustainability and long-term feasibility.

Originally, with more than 55 thousand creditors and the global value of a liability of around R$ 65 billion, and for being a Company that provides an essential and strategic service nationwide, reaching areas where there are no other operators, Oi’s Judicial Reorganization involved enormous challenges. One of the most important was the search for alignment and compatibility of interests and views on the Company’s restructuring, considering the diversity of creditor profiles: national and international banks and development agencies, ANATEL, bondholders, large and medium-sized suppliers, small creditors throughout Brazil and abroad, in addition to labor creditors, which resulted in the signing of more than 60 thousand agreements.

During the Judicial Reorganization Process, two creditors’ general meetings were held following the rules determined by market regulators, meeting compliance requirements and ensuring full transparency with its shareholders, partners, creditors, and investors. The first approved the Judicial Reorganization Plan, and the second approved a revision of the plan in the form of an Amendment, aligning the sale of strategic and non-strategic assets and laying the foundations for the Company’s Transformation Plan, which prioritizes the expansion of the fiber network and at the same time allowed its participation in the creation of the first neutral end-to-end network company in the country, V.tal. In this context, Oi even managed to equate ANATEL’s credits, being the largest transaction ever registered with the agency, generating more legal certainty and reducing the litigiousness that existed in this aspect.

At the end of the Judicial Reorganization process and after completing the steps provided for in the Amendment to the Judicial Reorganization Plan, which included the sale of the Company’s non-core assets, net debt was substantially reduced to R$ 18.3 billion at fair value, at the end of the third quarter of this year, a reduction resulting from the settlement of all debts with the BNDES, in an amount greater than R$ 4.6 billion, in addition to all debts incurred during the reorganization process for the maintenance of the Company’s operational feasibility and its preparation for the strategic transformation process, which allowed, for example, the successful launch of its fiber optic broadband operation, today the second largest in the country with around 4 million users.

During this new phase of the Company, Oi’s main goals will be the acceleration of core business revenues, and the search and creation of new sources of revenue; its organizational transformation and adaptation of its cost structure; the equating of the operational and regulatory liabilities of the fixed telephony concession and its legacy operations; and the continuity of negotiations with its financial creditors, aiming to optimize its debt profile and seeking long-term sustainability and viability.

Structurally, the New Oi will be formed by Oi Fibra, focused on the Consumer and Small and Medium Enterprises market; Oi Soluções, the unit that integrates IT and connectivity solutions for large companies in the B2B market; the relevant shareholding position in V.tal, the largest infrastructure and neutral network company in the country; and by two wholly-owned subsidiaries, Serede and Tahto, dedicated to network and logistics services and customer care and relationship services throughout the country, respectively. In addition, Oi continues to operate the services of its obligations as a wireline concessionaire and other services based on legacy infrastructure. With this, the Company remains firm in its purpose of providing digital solutions and fiber optic connections that aim to improve the lives of people and companies across the country.

In parallel with the process of the judicial supervision recovery closing, as informed in the Material Fact disclosed by the Company on Oct 27, 2022, Oi initiated negotiations with its creditors with the help of Moelis & Company’s financial advisors, aiming to optimize its debt profile, thus guaranteeing the Company’s commitment to continue the execution of its Strategic Plan and continue to take all necessary actions to restore its long-term sustainability and feasibility.

Q&A on JR’s Closing

1 – What effectively changes with the end of the Judicial Reorganization for shareholders?

The closing of the Judicial Reorganization Process represents the conclusion of a cycle, during which the Company was able to restructure itself and equate important issues. Obviously, the work does not end here. Much remains to be done and Oi is ready to explore all the alternatives made available to improve its debt profile, guaranteeing the necessary stability to be able to focus more on its operations, seeking out the sustainability of our operating cash generation. On the other hand, the end of the Judicial Reorganization process allows the Company, over time, to be eligible again to reintegrate gradually B3’s indices, such as the Ibovespa, which brings together the most tradable shares on the Brazilian Stock Exchange. This will bring more visibility and demand for Oi’s shares traded on B3.

2 – Although the closing of the Company’s Judicial Reorganization process, Oi still faces major challenges, such as the development of its new operating model and the optimization of its Capital Structure. What will be the next steps?

Oi successfully carried out all the steps provided for in the Judicial Reorganization Plan and in the Amendment to the Plan so far, with emphasis on the conclusion of the sales of the Mobile Assets UPI and InfraCo UPI. As a result, Oi was able to raise more than R$ 20 billion in cash to fund itself, reduce its debt and make the necessary investments to guarantee its active participation in the creation of the largest neutral network company in the country.

Even so, Oi will continue to focus on ensuring its long-term sustainability, executing its Strategic Plan and, at the same time, focusing on fiber development and managing its Capital Structure, seeking out greater balance between maturities and debt cost, leveraging on its assets, mainly the stake in V.tal.

The turnaround of the fiber business and legacy operations is proceeding according to plan. In addition, in the coming years, we expect favorable regulatory decisions, mainly in the Arbitration process with ANATEL, which should benefit Oi by reestablishing the economic balance of the Concession and offsetting possible migration costs to a new model.

To assist the Company in the process of balancing the Capital Structure, Moelis & Company was hired as a financial advisor for the development of a solution both within the scope of the Amendment to the Plan and the Strategic Plan.

To find out the content of the Material Fact on the closing of the Judicial Reorganization Process, click here.

To access the Judicial Reorganization Plan and the Amendment to the Plan click here.