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After converting debt to equity and once owning ~40%, PIMCO is charged with forming Oi’s board and management to help restore the lender to corporate stability.
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The fight centers on Oi’s 27.2% stake in V.tal – Oi wants a cash auction, while the PIMCO-led lender group tries to buy the asset through debt cancellation.
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Courts have seized bonds tied to PIMCO in connection with labor claims, Oi claims of abuse of control, and the results may define the limits of the lender’s influence in the major restructuring.
By Jarrett Banks
When Pacific Investment Management, known as PIMCO, first built its position in Brazilian telecommunications company Oi (Portuguese for Hey) in 2016, the country was in a very different political and financial climate.
Brazil emerged from the crisis under the leadership of President Michel Temer, who in turn tried to attract foreign capital to the country. This position was largely sustained during the Jair Bolsonaro administration, when asset sales, restructuring, flexibility and creditor pressure were widely seen as essential remedies for the highly indebted corporate sector.
Almost a decade later, this environment has changed. Under the leadership of President Luiz Inácio Lula da Silva, Brazil’s political position has become less amenable to aggressive creditor strategies and more oriented toward labor, social, and public interest concerns. Against this backdrop, PIMCO’s long involvement in the Oi restructuring has become the focal point of a broader legal and governance battle.
PIMCO, once both a major lender and nearly 40% shareholder after converting debt to equity during Oi’s pre-judicial restructuring, played an influential role in shaping the company’s direction. Critics claim that influence has gone beyond normal lender oversight. Court filings show that PIMCO’s pro-governance led to the appointment of a new board and executive management team while the company remained a significant bondholder, creating what opponents describe as a conflict between creditor recovery and corporate stability.
Those tensions are now swirling around Oi’s most valuable remaining asset: its 27.2% minority stake in V.tal, the digital infrastructure platform Oi is due to spin out in 2021. V.tal has the largest independent fiber network in Brazil and represents the crown jewel in Oi’s ownership. A court-appointed administrator has set a March 5 auction for the shares, setting a minimum price of approximately $2.4 billion and requiring only cash bids to ensure a transparent, competitive process.
A group of lenders led by PIMCO, acting through trustee UMB Bank, has challenged the terms. The group argues that noteholders should be allowed to receive assets by canceling the debt instead of paying in cash. Oi points out that such a structure would effectively override the intent of the auction, enabling lenders to secure assets at a discount and potentially crowding out other bidders.
Complicating matters further, all of the notes that will be used in the debt-for-equity swap have already been seized by Brazil’s labor courts. Those courts have held PIMCO and affiliated lenders liable for significant liabilities related to employees, and last week a Brazilian judge issued a preliminary injunction ordering the seizure of certain notes tied to PIMCO. Oi is also suing PIMCO, SC Lowe & Ashmore, alleging abuse of control and diminishing the rights of creditors attached to their properties.
The lawsuit introduces additional claims, including that executives installed during the lender’s effective tenure were compensated under packages tied to bond repayment metrics. Oi further alleges that internal communications show the lender’s representatives making strategic decisions within the company. In September 2025, a Brazilian court removed PIMCO’s supportive board and executive team, citing failure to provide reliable financial disclosures and comply with a court-approved restructuring plan.
PIMCO’s supporters argue that large lenders are inevitably influential in complex restructurings and that debt swaps are common tools for resolving distressed situations. But opinions have changed. What may have been tolerated by the Temer and Bolsonaro years as essential lending activity is now being examined through a different political lens, one more suspicious of concentrated financial power and more responsive to labor claims and public service risks.
It is a matter of climate change. Oi isn’t just another annoying issuer. It operates critical telecommunications infrastructure in Brazil, and previous filings claim that essential services suffered disruptions under the previous administration while financial disputes escalated. With Lula’s administration less interested in the consequences of laissez-faire restructuring, courts appear more willing to assess the creditor’s behavior and the wider consequences of financial engineering.
As the March auction approaches, it extends beyond single-asset sales. The battle over V.tal raises a big question: How far can a creditor go in shaping — or effectively controlling — a struggling company before the influence is abused? For PIMCO, a company that entered Brazil in an era of market-friendly reforms, the answer may now be determined to be less sympathetic to aggressive lender tactics in a political and judicial environment.
A PIMCO spokesperson told CorpGov “Any allegations that PIMCO, or its funds, either acted as Oi’s controlling shareholder or were responsible for Oi’s obligations are completely unfounded. Oi’s history of financial problems is well-documented as the company has been under judicial restructuring for more than 10 years. Attempting to hold PIMCO and its funds accountable for the company’s liabilities is wrong and unfair, and we are confident that the rule of law will prevail.“
Whether V.tal’s stake is sold in a foreign bid for cash or becomes the subject of other lawsuits, the outcome will mark a defining chapter in Latin America’s most complex restructuring — and a cautionary tale of how quickly the political winds can turn against financial power.
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From market savior to power struggle: PIMCO’s bet on Brazil’s Oi enters new political era appeared first on CorpGov.
