Brazil judge grants 180-day stay for Oi in record bankruptcy case

The headquarters of the Brazil's largest fixed-line telecoms group Oi, is pictured in Rio de Janeiro, Brazil, June 22, 2016. REUTERS/Sergio Moraes · Reuters

By Brad Haynes

SAO PAULO (Reuters) - Shares of Brazilian telecom firm Oi SA recovered on Wednesday after a judge weighing the country's biggest-ever bankruptcy filing granted a 180-day stay of further legal actions while he considered the merits of the case.

Oi also received a ruling in the United States where a tribunal approved its request for Chapter 15 bankruptcy protection, preventing creditors from suing in that country or foreclosing on U.S. assets.

Brazil's largest fixed-line phone carrier and No. 4 mobile operator, along with six subsidiaries, filed on Monday for protection from creditors on 65.4 billion reais ($19.3 billion) of bonds, bank debt and operating liabilities.

Oi's preferred shares jumped 10 percent in early trading, while common shares gained 4 percent, both erasing nearly half of their Tuesday declines on hopes the company could navigate Brazil's cumbersome bankruptcy process.

Rio de Janeiro Judge Fernando Cesar Ferreira Viana granted the urgent stay in a late Tuesday decision, but said: "It will take some time" to analyze the merits of the roughly 89,000-page filing for bankruptcy protection.

If he accepts the petition, Oi will then have 60 days to present a reorganization plan for the approval of its creditors.

Oi's bankruptcy filing, the equivalent of Chapter 11 in the United States, comes after a record number of companies in Brazil filed for creditor protection in 2015 as the economy plunged into its worst recession since the 1930s.

Unlike the U.S. Chapter 11 process, however, listed Brazilian companies undergoing in-court reorganization continue to trade on the Sao Paulo stock exchange.

Brazil's economic woes have exacerbated Oi's struggle with mounting mobile and broadband competition, spiraling debt and regulatory burdens on its fixed-line operations after a state-sponsored merger eight years ago.

(Additional reporting by Silvio Cascione in Brasilia; Editing by Daniel Flynn and Peter Cooney)