From Investment-Grade to Bankruptcy in 4 Months: Why Ratings Agencies are Still a Joke…(The Land Of Lie!)
by Wolf Richter
WolfStreet.com
June 21, 2016
The largest bankruptcy in Brazil’s history occurred on Monday when telecommunications carrier Oi SA threw in the towel. On Tuesday, it also filed for Chapter 15 bankruptcy protection in the US. A euro-denominated debt payment is coming due in less than a month, and it doesn’t have the money.
It owes creditors 65 billion reais ($19 billion). This includes 50 billion reais in bonds and bank loans, some of them denominated in foreign currencies.
It has been trying “restructure” its debt by stiffing creditors and practically wiping out stockholders. But ten days ago, CEO Bayard Gontijo resigned over a disagreement with some board members on the negotiations with the creditors. Last week, talks fell apart when board members rejected a plan by bondholders to swap their bonds for 95% of the company’s equity.
These creditors – among them Banco do Brasil and Itau Unibanco Holding – are licking their wounds. According to Bloomberg, the bankruptcy could also “trigger payments on $14 billion of derivatives contracts that are designed to pay out in an event of a default.”
Shareholders will be left with next to nothing. They include Pharol SGPS – a Portuguese telecom service provider – the Ontario Teachers’ Pension Plan, the state-owned Brazilian development bank BNDES, and BlackRock.
The bankruptcy is sending “shockwaves” through Brazil’s financial System, Bloomberg said. And the ratings agencies that were supposed to warn creditors of this sort of collapse before it happens?
The Rest…HERE
