Oi Creditors' Strategic Window Post-NDA Expiration: Unlocking Undervalued Debt Restructuring Opportunities in Distressed Markets

A timeline illustrating key milestones in Oi's restructuring journey, including the 2018 court-supervised reorganization, the 2024 NDA expiration, the USD 500m DIP facility backstop, and the proposed 2038 debt maturity extension. The graphic contrasts Oi's debt levels (R$43.7 billion in 2025) with its EBITDA improvements and fiber-optic investment progress.

In the evolving landscape of distressed markets, the expiration of non-disclosure agreements (NDAs) often marks a pivotal inflection point for creditors and debtors alike. For Oi, Brazil's once-dominant telecommunications provider, the post-NDA period has revealed both vulnerabilities and opportunities. As the company navigates a second wave of restructuring amid a broader trend of liability management exercises (LMEs), its creditors face a strategic window to secure favorable terms while balancing the need for operational continuity. This analysis explores how Oi's debt restructuring efforts-coupled with sector-specific dynamics-present undervalued opportunities for investors in distressed markets.

The Oi Restructuring: A Case Study in Incremental Progress

Oi's 2018 court-supervised reorganization, which reduced its debt burden from $20 billion to a more manageable level, initially offered a path to recovery, according to Ion Analytics. However, the company's recent financial struggles-exemplified by Fitch Ratings downgrading its IDRs to 'C' in May 2025-highlight the fragility of its position. The expiration of the previous reorganization's NDA in 2024 triggered a renewed round of creditor negotiations, culminating in a USD 500m backstop for a USD 650m superpriority DIP facility, as reported by Ion Analytics. This arrangement, which postponed the creditor vote until April 2025, underscores the delicate balance between preserving liquidity and securing long-term solvency.

A critical innovation in Oi's strategy has been the capitalization of interest on senior secured debt, effectively rolling USD 90m of immediate cash obligations into principal, according to Investing.com slides. This maneuver, while temporarily easing cash flow pressures, reflects a broader trend in 2025: creditors increasingly favoring out-of-court restructuring mechanisms to avoid the rigidity of bankruptcy proceedings. As one analyst notes, "LMEs have become a popular tool for delaying insolvency, particularly with private credit funds and special situations investors willing to provide fresh capital at favorable terms," a point highlighted in the company slides. Yet, these arrangements often come with tighter covenants and heightened operational scrutiny, leaving companies like Oi exposed to missteps in execution.

Debt Valuation and the Art of the Possible

Oi's debt load remains daunting, exceeding R$43.7 billion in 2025, with a proposed restructuring plan aiming to extend maturities until 2038, according to Fitch Ratings. While this timeline offers breathing room, it also raises questions about the company's ability to generate sufficient cash flows to service such long-dated obligations. The proposed capital increase and asset sales-intended to repay the DIP facility and fund operational investments-add another layer of complexity, as outlined by Ion Analytics. For creditors, the challenge lies in aligning these plans with their own risk-return profiles.

The broader distressed market context suggests that Oi's situation is far from unique. The company slides indicate that firms which executed LMEs in previous years are now facing liquidity constraints, pushing them toward in-court or out-of-court restructurings. This environment creates opportunities for creditors to negotiate terms that prioritize debt-to-equity conversions, equity infusions, or asset-backed financing. For instance, Oi's pivot to fiber-optic infrastructure-driven by a tenfold increase in broadband customers since 2019, as shown in the slides-could serve as collateral for future financing, provided the company meets its operational milestones.

Sector Dynamics: A Double-Edged Sword

The Brazilian telecom sector, while facing headwinds such as a 40%+ tax burden and cord-cutting trends, is also undergoing a transformative phase, according to a Mordor Intelligence report. The rollout of 5G and the government's National Digital Agenda 2030-aimed at universal fiber-optic coverage-present growth opportunities that could bolster Oi's recovery, the Mordor Intelligence report notes. Major competitors like TIM and Vivo are already achieving 64% and higher 5G population coverage, intensifying competitive pressures on Oi to accelerate its own infrastructure investments.

However, these sector dynamics also highlight the risks of overleveraging. Oi's recent failed attempt to sell its fiber-optic network to V.tal-a deal that could have generated critical liquidity-underscores the challenges of monetizing assets in a consolidating market, a point underscored by Fitch Ratings. For creditors, this reinforces the importance of structuring agreements that allow for flexibility in asset management while maintaining strict oversight of operational performance.

Strategic Opportunities for Creditors

The key to unlocking value in Oi's restructuring lies in identifying asymmetries between the company's long-term potential and its short-term constraints. For instance, the proposed JRP amendment-aimed at generating R$2.6 billion in cash reinforcement, as highlighted in the company slides-could be leveraged to fund high-ROI projects in fiber-optic expansion or 5G deployment. Creditors with a long-term horizon might also consider equity stakes in these initiatives, aligning their interests with Oi's operational turnaround.

Moreover, the resolution of Oi's landline concession issues-critical to its regulatory compliance and revenue stability, as noted in the slides-presents a unique opportunity for creditors to influence governance structures. By embedding covenants that tie debt servicing to regulatory milestones, creditors can mitigate the risk of future defaults while incentivizing operational efficiency.

> Data query for generating a chart: Plot Oi's net debt (R$10,034 million in Q2 2025, per the company slides) against its EBITDA performance (negative R$98 million in Q2 2025, per the slides) and compare with sector peers' debt-to-EBITDA ratios. Overlay projections for 5G and fiber-optic revenue growth (9.5% CAGR in the Mordor Intelligence report) to illustrate potential value creation.

Conclusion: A Calculated Bet on Resilience

Oi's post-NDA restructuring efforts reflect the broader challenges and opportunities in distressed markets. While the company's debt load and operational hurdles are significant, its strategic pivot to fiber-optic infrastructure and the sector's long-term growth prospects offer a compelling case for creditors willing to take a measured approach. The key lies in structuring agreements that balance immediate liquidity needs with long-term value creation, leveraging Oi's position in a sector poised for transformation. For investors, this represents not just a bet on a single company, but on the resilience of Brazil's telecom ecosystem in the face of systemic challenges.