Oi SA (ADR) (NYSE: OIBR.C) Suffers Major Setback

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Oi SA (ADR) (NYSE: OIBR.C)’s CEO resignation could not have come at a more difficult time. The company is in the process of negotiating a debt restructuring deal with debtholders as part of the efforts to strengthen the balance sheet.

But before the talks can conclude, Bayard Gontijo decided to resign from his role as the CEO of Oi SA (ADR) (NYSE: OIBR.C). The company didn’t explain why Gontijo resigned, but only said that it has decided on who would become the caretaker CEO.

Interim CEO

OIBR has tapped its financial administrator called Marco Schroeder to replace Gontijo. Schroeder will both act as the CEO and continue serving in his primary finance role. It is not clear whether the board plans to confirm Schroeder in the CEO position or whether a search for a permanent CEO will be launched soon.

Confusion

But the exit of Gontijo has created more confusion in OIBR’s debt restructuring talks. For investors, it has exposed deeper underlying problems in the company’s leadership. The resignation of Gontijo could also hurt the ongoing debt restructuring negotiations.

Although OIBR refused to wade into the issue of why Gontijo resigned his position, people with insider knowledge of the development cited disagreement. It is claimed that Gontijo clashed with the board on the path of the debt restructuring negotiations. As such, he decided to resign so that he doesn’t appear to be a stumbling block in the debt talks.

But it also turns out that all along, debtholders negotiating with Oi SA (ADR) (NYSE:OIBR.C) believed that the board and Gontijo were reading from the same script. Therefore, the resignation of has shocked them Gontijo and that explains why another layer of uncertainty has been added in the debt negotiations.

$14.6 billion debt burden for Oi SA (ADR) (NYSE: OIBR.C)

Oi SA (ADR) (NYSE: OIBR.C) is trying to repair its balance sheet, which is weighed down by nearly $14.6 billion in debt, some of which will fall due soon. About $260 million in bond will mature on July 26, 2016, yet OIBR doesn’t appear to be in a position to repay the debt.

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