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Brazil's Oi Said to hire adviser to restructure 60b reais debt

[SAO PAULO] Oi SA, the most indebted phone company in Brazil, hired advisers to help restructure its 60 billion reais (S$21 billion) in debt, one person with knowledge of the matter said, asking not to be identified because the information is private.

On Thursday, Russian billionaire Mikhail Fridman withdrew his proposal to help finance a merger between Oi and Telecom Italia SpA's Brazilian unit. Telecom Italia's Tim Participacoes SA doesn't want to continue with discussions, Mr Fridman's investment vehicle LetterOne Technology said, adding that it's still interested in investing in Brazil.

Mr Fridman's withdrawal ended a four-month effort to structure a deal and left Rio de Janeiro-based Oi with no alternative other than restructuring. The company has US$4.5 billion of debt payments due by the end of next year and its high rate of cash burn will make it hard for Oi to borrow to pay that back, according to Robert Jaeger, an analyst at Societe Generale SA in London.

A representative of Oi declined to comment.

The company had 60 billion reais in total debt at the end of the third quarter last year, according to data compiled by Bloomberg. It had US$2.2 billion of short-term debt and US$3.3 billion of cash at that point, the data show.

"Oi's balance sheet is unsustainable in its current form," said Eriko Miyazaki-Ross, a credit analyst at Barclays Plc in New York.

"The only real avenue open to them to address this was consolidation."