Brazilian restructuring specialists at an event in São Paulo today warned that telecom operator Oi’s recent attempt to restructure its 2024 $650m DIP loan through a Chapter 11 could deter international investors from providing financing to companies under Brazil’s judicial recovery regime.

Pinheiro Neto Advogados partner Thiago Braga Junqueira said Oi’s move had revived debate over how far a Brazilian restructuring can extend abroad.

The telecom operator’s judicial recovery plan was approved in April 2024 and featured the largest a DIP loan Brazil had seen since introducing the mechanism four years earlier. Despite fresh financing, asset sales, and lower capex, Oi's finances still struggled. Earlier this year, the operatorsought to close its Chapter 15 process and open a new Chapter 11 case to restructure credits that could not be restructured in Brazil, including that DIP financing.

Junqueira said the case raised “a super interesting and super sensitive discussion” about whether a Brazilian debtor in recovery should be allowed to refile abroad to renegotiate obligations contracted under the protection of a Brazilian court. He noted that Judge Lisa Beckerman in New York later rejected Oi’s request to convert the case, but “on preliminary, procedural grounds from the US perspective” rather than on the substance of the issue.

Junqueira said the episode has already unsettled investors.

“I spoke to ten major special-situations funds — people very active in this space — and they all said the same thing: they would start to think much more carefully before disbursing a DIP loan in Brazil if a debtor can later refile abroad to restructure that same debt,” Junqueira said.

“This uncertainty directly affects the stability that a DIP lender expects,” he added.

Junqueira serves as local counsel to V.tal, a major Oi creditor and a vocal opponent in its pursuit of the Chapter 11 filing.

Stefano Pelosof, a director at Farallon Capital Management, said the controversy underscored the need for legal certainty.

“The problem isn’t the parallel proceedings, it’s the motivation for them,” he said, adding that “if you use Chapter 11 as a refuge to cut creditors, to mimic a substantial consolidation, or to escape the five-year quarantine between Brazilian restructurings, judges here must show strength to preserve legal certainty.”

Inconsistency in how courts treat such cases raises financing costs, according to Pelosof.

“Security may seem like a disadvantage for the more immediate players, but for the system it’s a benefit,” he said.

“The more uncertainty, the higher the risk premium and the lower the willingness to invest,” he added.

Gabriel Barretti, a special situations partner at Banco BTG Pactual, pointed to Ambipar’s recent parallel filings as the next “test” of how Brazilian and US courts handle concurrent insolvency proceedings. Last month the waste management group simultaneously filed an RJ in Brazil and a Chapter 11 in the US, listing 71 subsidiaries in the former and just one — Ambipar Emergency Response — in the latter.

Judge Beckerman puts emphasis on comity

The concerns over cross-border coordination were echoed in remarks made by Judge Beckerman, also in São Paulo today (3 November). Beckerman said that US courts have long granted recognition to foreign insolvency proceedings and that Chapter 15 codified practices already present in US case law.

The model law gives courts a clearer roadmap, but judges still assess whether particular foreign remedies are permissible under the applicable foreign law before granting recognition, she explained.

Beckerman described the high threshold for refusing recognition on public policy grounds, saying a foreign measure must be “manifestly contrary to public policy” to fail US recognition, and that successful invocations of that exception are rare.

US bankruptcy courts typically examine what is permitted under the foreign jurisdiction’s law and look for supporting testimony or, where available, written judicial decisions from the foreign forum, Beckerman explained. She cited examples of recent reliance on a Hong Kong judge’s reasoned decision and on Canadian appellate analysis when those materials were provided to the US court.

When foreign law or practice is unsettled, Beckerman said judges will look for concrete foreign-court rulings or case law and, where necessary, conduct their own review of the foreign materials. She recounted that her chambers asked for additional Australian precedent in one early Chapter 15 and that the court’s independent review of the foreign cases helped inform the recognition decision.

Beckerman noted that Chapter 15 work is concentrated in a relatively small group of US judges who see these cross-border matters regularly, and that having detailed foreign-court analyses and testimony makes approval more straightforward for courts asked to enforce or recognize foreign restructuring measures.

“I literally read everything,” she remarked.

Read our analysis of whether Chapter 11s are the new Chapter 15s for Brazilian companies on 9fin.

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