Brazilian telecoms company Oi has confirmed that Espirito Santo Group’s Rioforte subsidiary has failed to repay an €879 million bond owed to Portugal Telecom, despite a week’s extension to the deadline.
Oi and Portugal Telecom are merging and the Oi board of directors has watched in shock as Portugal Telecom is caught in the crossfire of the Espirito Santo meltdown, leaving its carefully constructed deal with some major structural weaknesses.
Confirmation that the new repayment deadline had been missed was made by the Brazilians in a statement to the Brazilian market regulator.
Oi stated that it is to "take all appropriate measures to collect titles and deeds necessary to protect and defend its interests."
Rioforte had been given an extra seven days to come up with the money but this was never really going to happen as the extent of the Espirito Santo mess started to hit the headlines.
In the meantime, holding company Espirito Santo International filed for court protection in Luxembourg to keep its creditors at bay.
Yesterday Rioforte sought the same protection, leaving PT nursing a major loss and the Brazilian deal in question.
Rioforte blamed its illiquid position on its parent, giving the reason for protection as being "related to substantial difficulties in the company that owns 100% of its capital, Espirito Santo International.”
The case of the unpaid bond led to new terms and conditions for the merger between PT and Oi and there may be more ‘adjustments’ to come, no doubt in Oi’s favour.
As it stands, Zeinal Bava, the current president of PT Portugal, will become the new CEO of the merged company, although even this now is in doubt as a group of PT shareholders are taking legal action against the PT board for their deep losses attributable to a sharp decline in the PT share price.
