Oi aims to renegotiate debt before taking new capital -source

By Ana Mano SAO PAULO (Reuters) - The board of Brazil's fourth-largest wireless carrier Oi SA on Wednesday decided to first solve its court-supervised reorganization before discussing a potential capital increase or new investments, a source told Reuters. The company declined to comment on the account provided by the source, who spoke on condition of anonymity due to the sensitivity of ongoing talks. Oi said in a securities filing late on Wednesday that its board had received a report from financial adviser LaPlace based on feedback from creditors and authorized its executives to move forward with talks about a possible debt-for-equity swap. In December, a group of Oi bondholders represented by Moelis & Co proposed injecting $1.25 billion of new capital into Oi, a move that would give them immediate control of the carrier through a debt-for-equity swap. The creditors' plan, backed by Egyptian billionaire Naguib Sawiris, is part of an alternative reorganization plan they presented to the company after considering Oi's own reorganization proposal "unacceptable." The source, who has direct knowledge of the talks, said the priority continues to be finalizing the company's debt restructuring plan. "The in-court reorganization and a potential capital increase are two separate things. A capital increase may be discussed, but only in the future," the source said after Wednesday's board meeting. Oi filed in June for Brazil's largest ever bankruptcy protection to restructure about 65 billion reais ($20.8 billion) of bank, bond and regulatory liabilities. Reuters reported in November that Oi planned to repay smaller suppliers and contractors ahead of banks and bondholders. According to the source, the company is on track to finish paying such claims. After conclusion of ongoing court-mediated talks, Oi's smaller creditors should be repaid "in a matter of weeks," the source said. ($1 = 3.13 reais) (Reporting by Ana Mano; editing by Diane Craft and Bill Rigby)