Bankruptcy judge orders Oi to hang up

A Rio de Janeiro business court has declared Oi Telecom bankrupt, ending the company’s second attempt at restructuring and burying the last vestiges of Brazil’s once-vaunted “national champions” policy. The decision allows operations to continue on a provisional basis to avoid disrupting essential services while the company’s assets are liquidated.

Shares cratered after the announcement. Oi’s common stock dropped 35.71% and its preferred shares fell 47.85%, with trading halted “to preserve transparency” and market functioning, according to the São Paulo exchange. 

With negative equity and assets insufficient to cover liabilities, equity holders are unlikely to recover value. Specialists note that in Brazil’s hierarchy of payments, employees and the tax authorities get priority, then secured creditors, then unsecured creditors, with shareholders at the very end.