Oi S.A. - em recuperacao judicial and Ojas N. Shah

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re: 	Chapter 15
OI S.A., et al., 	Case No. 16-11791 (SHL)
Debtors in a Foreign Proceeding. 	(Jointly Administered)
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DECISION GRANTING
FOREIGN REPRESENTATIVE’S MOTION TO ENFORCE
BRAZILIAN REORGANIZATION PLAN AND GRANT RELATED RELIEF1
A P P E A R A N C E S :
WHITE & CASE LLP
Counsel for Antonio Reinaldo Rabelo Filho as Petitioner
and Foreign Representative
1221 Avenue of the Americas
New York, New York 10020-1095
By: 	John K. Cunningham, Esq.
Mark P. Franke, Esq.
-and-
Southeast Financial Center
200 South Biscayne Blvd., Suite 4900
Miami, Florida 33131
By: 	Jason N. Zakia, Esq.
Richard S. Kebrdle, Esq.
Gregory L. Warren, Esq.
GREENBERG TRAURIG, LLP
Counsel for Pharol, SGPS S.A., Bratel B.V. and Bratel S.À.R.L.
200 Park Avenue
New York, New York 10166
By: 	Ryan A. Wagner, Esq.
-and-
1 	This written decision memorializes the Court’s bench ruling that was read into the record on June 14, 2018.
While the substance of the decision remains the same, edits have been made for ease of comprehension.
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333 S.E.2nd Avenue
Miami, Florida 33131
By: 	Mark D. Bloom, Esq.
Paul J. Keenan, Jr., Esq.
CLEARY GOTTLIEB STEEN & HAMILTON LLP
Counsel for the Steering Committee
One Liberty Plaza
New York, New York 10006
By: 	Richard J. Cooper, Esq.
Luke A. Barefoot, Esq.
Samuel P. Hershey, Esq.
DECHERT LLP
1095 Avenue of the Americas
New York, New York 10036
By: 	Allan S. Brilliant, Esq.
Shmuel Vasser, Esq.
Stephen M. Wolpert, Esq.
JONES DAY
250 Vesey Street
New York, New York 10281
By: 	Corinne Ball, Esq.
Stephen J. Pearson, Esq.
Anna Kordas, Esq.
DAVIS POLK & WARDWELL LLP
Counsel for Solus Alternative Asset Management LP
450 Lexington Avenue
New York, New York 10017
By: 	Timothy Graulich, Esq.
David Schiff, Esq.
KRAMER LEVIN NAFTALIS & FRANKEL LLP
Counsel for Aurelius Capital Management, LP
1177 Avenue of the Americas
New York, New York 10036
By: 	David E. Blabey, Jr., Esq.
NORTON ROSE FULBRIGHT US LLP
1301 Avenue of the Americas
New York, New York 10019
By: 	Howard Seife, Esq.
Marian Baldwin Fuerst, Esq.
Francisco Vazquez, Esq.
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SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
Before the Court is the motion (the “Motion”) [ECF No. 232] of Antonio Reinaldo
Rabelo Filho, the foreign representative for the debtors in the above-captioned Chapter 15 cases
(collectively, the “Chapter 15 Debtors”), requesting that this Court give full force and effect and
grant comity in the United States to the foreign restructuring plan (the “Brazilian RJ Plan”)
confirmed in their Brazilian judicial reorganization (the “Brazilian RJ Proceeding”) pending
before the Seventh Business Court of Rio de Janeiro (the “Brazilian RJ Court”) and also seeking
related relief pursuant to Sections 105(a), 1145, 1507(a), 1521 and 1525(a) of the Bankruptcy
Code. The Chapter 15 Debtors include Oi S.A. (“Oi”), Telemar Norte Leste S.A. (“Telemar”),
Oi Brasil Holdings Coöperatief U.A. (“Coop”), and Oi Móvel S.A. (“Móvel”). Three affiliates
of Oi—Portugal Telecom International Finance B.V. (“PTIF”), Copart 4 Participações S.A.
(“Copart 4”), and Copart 5 Participações S.A. (“Copart 5”)—are also debtors in the Brazilian RJ
Proceeding, but are not debtors in these Chapter 15 proceedings. These three affiliates, together
with the Chapter 15 Debtors, are referred to collectively as the “Brazilian RJ Debtors.” The
Brazilian RJ Debtors and their non-debtor affiliates are referred to collectively as the “Oi
Group.”
Several parties have interposed objections to the language of the proposed order
submitted by the Chapter 15 Debtors on the Motion, but these objections have since been
resolved. That leaves only one objection to the Motion—an objection (the “Objection”) [ECF
No. 245] filed by Pharol, SGPS S.A. (“Pharol”), Bratel B.V. and Bratel S.À.R.L. (“Bratel,” and,
together with Pharol and Bratel B.V., the “Pharol Parties”), who are direct and indirect
shareholders of Debtor Oi. Numerous other parties with an economic stake in the Brazilian RJ
Proceedings have submitted statements in support of the Motion, including the Steering
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Committee for an Ad Hoc Group of Bondholders of Oi (the “Steering Committee”), the
International Bondholder Committee (the “IBC”), and noteholder Solus Alternative Asset
Management. One party, Jasper R. Berkenbosch, who is the insolvency trustee appointed in the
Dutch insolvency proceeding of Chapter 15 Debtor Coop, has reserved his right to interpose an
objection based on whether the plan proposed by Coop in those Dutch proceedings receives
approval from creditors and the Dutch courts.
Nowhere in the Objection do the Pharol Parties ask this Court to rule on any of the legal
issues that are still pending in proceedings in Brazil, including the pending appeals of decisions
of the Brazilian RJ Court or an arbitration and mediation associated with the Brazilian RJ
Proceeding. But the Pharol Parties do request that this Court exercise its discretion to delay
giving full force and effect and granting comity to the Brazilian RJ Plan until all the proceedings
in Brazil have been resolved. For the reasons discussed below, however, the Objection is
overruled and the Motion is granted.
BACKGROUND
A. The Oi Group and the Filing of the Brazilian RJ Proceeding
The Oi Group is among the world’s largest integrated telecommunications service
providers, with over 70 million customers. Declaration of Antonio Reinaldo Rabelo Filho in
Support of the Motion for Order Granting Relief to (I) Enforce the Brazilian Reorganization
Plan and (II) Grant Related Relief (the “Supporting Factual Declaration”) [ECF No. 230] at ¶ 4.
The Oi Group is also a critical source of telecommunications services in Brazil. 	Id. It
is Brazil’s largest fixed telephone service provider, with a market share of 34.5% of the total
fixed-lines in service in the country. Id.
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On June 20, 2016, the Brazilian RJ Debtors initiated the Brazilian RJ Proceeding through
the filing of a joint voluntary bankruptcy petition in the Brazilian RJ Court. Supporting Factual
Decl. at ¶ 20. The Brazilian RJ Debtors sought to restructure approximately BRL $65 billion in
third-party debt, which constituted the largest restructuring case in Brazil’s history. Id. Ojas N.
Shah was initially appointed as the foreign representative for the Brazilian RJ Proceeding with
respect to of the Chapter 15 Debtors. Id.
The third-party indebtedness of the Oi Group that is subject to the Brazilian RJ Proceeding
consists generally of four types of debt: (i) unsecured export credit facilities guaranteed or insured
by export credit agencies or other quasi-governmental financial institutions; (ii) unsecured bonds
and like securities issued, varyingly, under New York law, English law, and Brazilian law; (iii)
two series of securities issued through Brazilian financial institutions, which consist of interests in
lease payments owed by certain of the Brazilian RJ Debtors for the use of real property leased
from other Brazilian RJ Debtors; and (iv) secured and unsecured bilateral and syndicated
Brazilian bank debt. Id. at ¶ 9. Because the Oi Group is financially integrated, certain of the
group’s entities engage in intercompany borrowing and lending. Id. at ¶ 10. As a result, certain
of the Brazilian RJ Debtors owe intercompany debt, which is subject to restructuring under the
Brazilian RJ Plan. Id.
B. Proceedings in this Court
On June 21, 2016, the day after commencing the Brazilian RJ Proceeding, Mr. Shah—on
behalf of each of the Chapter 15 Debtors—petitioned for commencement of these Chapter 15
proceedings seeking recognition of the Brazilian RJ Proceeding as the foreign main proceeding of
each of the Chapter 15 Debtors [ECF Nos. 7, 8]. On July 22, 2016, this Court entered the Order
Granting Recognition of Foreign Main Proceeding and Certain Related Relief [ECF No. 38],
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holding, among other things, that the center of main interests of each of the Chapter 15 Debtors is
in Rio de Janeiro, Brazil, and recognizing the Brazilian RJ Proceeding as the foreign main
proceeding of the Chapter 15 Debtors.
On July 18, 2017, consistent with an order of the Brazilian RJ Court and pursuant to a
resolution of the board of directors for each of the Chapter 15 Debtors, the Chapter 15 Debtors
simultaneously (i) revoked the appointment of Mr. Shah as foreign representative of its Brazilian
RJ Proceeding in the United States and his related power-of-attorney, and (ii) appointed Antonio
Reinaldo Rabelo Filho as foreign representative (the “Foreign Representative”) in the United
States for its Brazilian RJ Proceeding and granted him a power-of-attorney to act as such. See
Disclosure Pursuant to 11 U.S.C. § 1518 Regarding Substitution of Foreign Representative ¶
6 [ECF No. 79]. Thus, Mr. Rabelo replaced Mr. Shah as the foreign representative of the
Brazilian RJ Proceeding for each of the Chapter 15 Debtors. Supporting Factual Decl. at ¶ 107.
On July 7, 2017, Mr. Berkenbosch commenced a Chapter 15 proceeding in this Court—
Case No. 17-11888—requesting that this Court terminate its prior order recognizing the Brazilian
RJ Proceeding as a foreign main proceeding for Chapter 15 Debtor Coop and instead recognize
Coop’s Dutch bankruptcy proceeding as its foreign main proceeding. [ECF No. 69]. Both Mr.
Rabelo and the Steering Committee filed objections to this request. [ECF Nos. 105, 108]. Mr.
Berkenbosch and the IBC filed replies to these objections. [ECF Nos. 123, 124]. After extensive
litigation—including a trial—this Court issued a memorandum decision denying recognition of
the Dutch petition and declining to modify or terminate its prior recognition of the Brazilian RJ
Proceeding as the foreign main proceeding for Coop. The issues in that litigation were complex
and will not be discussed in depth here in the interest of brevity. But they are set forth in detail in
two written decisions: See In re Oi Brasil Holdings Cooperatif UA, 578 B.R. 169 (Bankr. SDNY
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2017) and 582 B.R. 358 (Bankr. S.D.N.Y. 2018) (denying request for partial reconsideration of
that decision). Of note, however, is that the warring parties in that litigation stand united today in
support of the Foreign Representative’s motion to grant comity to the Brazilian RJ Plan and for
related relief.
C. Events in the Brazilian RJ Proceeding
Since the filing of the Brazilian RJ Proceeding, the Brazilian RJ Debtors have negotiated
with stakeholders through the course of a highly contentious, year-and-a-half long,
multijurisdictional restructuring process. Supporting Factual Decl. at ¶ 25. These discussions
ultimately led to the consensual approval and subsequent confirmation of the Brazilian RJ Plan in
Brazil. Id.
Several bondholder groups actively participated in the restructuring process, including
through litigation in the Brazilian courts. Supporting Factual Decl. at ¶ 26. For instance, both the
Steering Committee, as well as the IBC, filed pleadings with and requested relief from the
Brazilian RJ Court throughout the Brazilian RJ Proceeding. Id. Creditors of Coop and PTIF, two
entities of particular contention in the process, also participated extensively. Specifically,
creditors Syzygy Capital Management, LTD. and Capricorn Capital Ltd.—funds managed by
Aurelius Capital Management, LP—both filed pleadings with and requested relief from the
Brazilian RJ Court. Post-Trial Memorandum of Decision [ECF No. 174] at 17.
The first draft of the Brazilian RJ Plan was filed on September 5, 2016, in compliance
with the timeline required under the Brazilian bankruptcy law. Supporting Factual Decl. ¶ 27.
Both prior and subsequent to this filing, company management attended in-person meetings in
New York and Brazil with various parties-in-interest, including the Oi Group’s Brazilian bank
creditors, the Brazilian telecommunications regulator Agência Nacional de Telecomunicações
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(“ANATEL”), lenders under the Oi Group’s export credit facilities, and representatives of
bondholder groups, such as the Steering Committee, members of the IBC, and other significant
holders of the notes issued by Oi, Coop and PTIF. Seventh Statement Notifying the Court of the
Status of the Restructuring (the “Seventh Declaration”) [ECF No. 201] at ¶ 3.
On March 28, 2017, the Brazilian RJ Debtors filed its first series of proposed
modifications to the Brazilian RJ Plan, on the basis of requests made by parties during
negotiations. Supporting Factual Decl. at ¶ 29. Further modifications were considered in the
following months, and a revised version of the Brazilian RJ Plan was filed on October 11, 2017.
Id. On numerous occasions during October, November and December of 2017—prior to the
filing of the final version of the Brazilian RJ Plan—representatives from certain creditors met
with the company and its financial and legal advisors to discuss additional modifications. Id. at ¶
30.
On November 27, 2017, the company filed a new version of the Brazilian RJ Plan along
with a modified draft term sheet that incorporated feedback from discussions with various
stakeholders, including ANATEL, Caixa Econômica Federal, Itaú Unibanco, and Banco do
Brasil. Seventh Declaration at ¶ 4. These modified terms went on to become the material
economic terms of the final Brazilian RJ Plan. Id. The Company also came to an agreement with
the IBC and the Steering Committee on the material economic terms of a new equity capital
infusion to follow implementation of the Brazilian RJ Plan and the backstop of that offering by
certain bondholders. See, e.g., Supporting Factual Decl. ¶¶ 27, 31.
While the Brazilian RJ Plan was being revised, other events were taking place. Notice of
the filing of the first draft of the Brazilian RJ Plan was published on September 30, 2016, after
which creditors of the Brazilian RJ Debtors had 30 business days to file objections to the
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Brazilian RJ Plan. Supporting Factual Decl. at ¶ 28. Following the filing of various objections,
the Brazilian RJ Court set the General Meeting of Creditors (the “GCM”) on approval of the
Brazilian RJ Plan for October 9, 2017 on first call and, if necessary, October 23, 2017 on second
call. Id. The Brazilian RJ Court postponed the GCM several times, with final dates set for
December 19 and 20, 2017 on first call and, if necessary, February 1 and 2, 2018 on second call.
Id.
In anticipation of this pending creditor vote, on November 16, 2017, the Brazilian RJ
Court entered a decision that revoked the power to participate in the restructuring process of those
it found to be conflicted members of Oi’s executive officers that had been appointed by Oi’s
board of directors (i.e., members nominated or appointed by certain of Oi’s shareholders).
Seventh Declaration at ¶ 5. In that decision, the Brazilian RJ Court also vested sole authority over
the restructuring process with Oi’s chief executive officer and directed him to present the final
Brazilian RJ Plan no later than December 12, 2017. 	Id.
Following this decision, the Brazilian RJ Debtors filed a new version of the Brazilian RJ
Plan on December 12, 2017. Supporting Factual Decl. at ¶ 31. The GCM was then held on
December 19 and 20, 2017. Id. During the course of the GCM, the Brazilian RJ Plan was further
modified with input from voting parties, and consolidated into a final version dated December 20,
2017. Id. This was the version approved by the creditors and ultimately confirmed, with certain
modifications, by the Brazilian RJ Court. Id.
Under Brazilian bankruptcy law, the GCM could only be assembled on first call if
attended by creditors, or their valid representatives, that held more than 50% of the value of total
allowed claims in each of the Brazilian RJ Debtors’ four creditor classes: labor-related claims
(“Class I”); secured claims (“Class II”); unsecured claims, statutorily or generally privileged
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claims, and subordinated claims (“Class III”); and claims held by “small companies” under
Brazilian law (“Class IV”). Declaration of Sérgio Ricardo Savi Ferreira in Support of the Motion
for Order Granting Relief to (I) Enforce the Brazilian Reorganization Plan and (II) Grant Related
Relief (the “Supporting Legal Declaration”) [ECF No. 231] ¶¶ 29, 32. Attendance at the GCM
easily met this quorum requirement, with the following percentages by value of claims in
attendance: 92.28% of Class I, 100% of Class II, 98.57% of Class III, and 59.04% of Class IV.
Supporting Factual Declaration, Exhibit C at 5-6. Indeed, the GCM was of unprecedented size,
drawing participation from over 36,000 creditors, in what the Brazilian RJ Court described as,
“numbers never before seen in a Brazilian judicial reorganization proceeding.” Supporting
Factual Decl., Exhibit C at II.
Creditors in attendance or represented at the GCM had the option of voting for, against, or
abstaining from voting on, the Brazilian RJ Plan. Supporting Legal Decl. at ¶ 29; Supporting
Factual Decl. at ¶ 48. But prior to voting on approval of the Brazilian RJ Plan itself, creditors
voted on whether they wanted the Brazilian RJ Plan to proceed on the terms of a consolidation of
the Brazilian RJ Debtors. Supporting Factual Decl. at ¶ 49. Since the Oi Group is economically
interconnected through related intercompany agreements, guarantees, and obligations, and
because managerial, administrative, and financial decisions are made by Oi for the benefit of the
entire Oi Group, the Brazilian RJ Plan is based on the consolidation of the assets and liabilities of
all the Brazilian RJ Debtors. Id. at ¶ 49. Consolidation was for voting and distribution purposes
only and the Brazilian RJ Plan does not cause the corporate consolidation or merger of the
Brazilian RJ Debtors. Id. This consolidation was overwhelmingly approved by the creditors of
the Brazilian RJ Debtors at the GCM, with the following percentages by value of claims
approving: 99.5% of Oi claim holders, 96.87% of Móvel claim holders, 99.88% of Telemar claim
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holders, 97.68% of Coop claim holders, 99.09% of PTIF claim holders and 100% of Copart 4 and
Copart 5 claim holders. 	See Minutes of the GCM at 5-6, attached as Exhibit F to the Supporting
Factual Decl.
Following the vote approving consolidation, the creditors of the Brazilian RJ Debtors
voted on approval of the Brazilian RJ Plan on a consolidated basis. Supporting Factual Decl. at ¶
53. The Brazilian RJ Plan was voted on and approved in overwhelming numbers in every class at
a GCM that was also attended by a record number of creditors. See Order Confirming Brazilian
RJ Plan (the “Brazilian Confirmation Order”) [ECF No. 230-3] at 5-6, attached as Exhibit C to the
Supporting Factual Decl. Specifically, when considered by number of claim holders per class, the
following percentages voted for approval of the Brazilian RJ Plan: 100% of the claim holders in
Classes I and II, 99.56% of claim holders in Class III, and 99.8% of claim holders in Class IV.
Supporting Factual Decl. at ¶ 53.
On January 8, 2018, the Brazilian RJ Court entered the Brazilian Confirmation Order
ratifying and confirming the Brazilian RJ Plan, but modified certain provisions relating to the
reimbursement of creditors’ advisor fees and the eligibility of bondholders to participate as
backstop investors under the contemplated backstop agreement. See Brazilian Confirmation
Order at 9, attached as Exhibit C to the Supporting Factual Decl. The Brazilian Confirmation
Order was published on February 5, 2018. Supporting Factual Decl. at ¶ 56. Under Brazilian
law, a creditor has five business days from the publication of a confirmation order to file a motion
for clarification, and, within fifteen business days after a decision on such motion is published,
may file another motion for clarification or an interlocutory appeal of the same. Supporting Legal
Decl. at ¶ 43.
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Several motions for clarification and interlocutory appeals have been filed with respect to
the Brazilian Conformation Order. Supporting Factual Decl. at ¶ 57. Although still subject to
certain pending appeals, the Brazilian Confirmation Order and Brazilian RJ Plan have not been
stayed, either fully or partially, and therefore remain in full force and effect, according to their
terms, as of the date that the Foreign Representative’s Motion was filed with this Court.
Supporting Legal Decl. at ¶ 44; Supporting Factual Decl. at ¶ 57. A stay was sought by the Pharol
Parties, among others, but was denied. See Decl. of Giuliano Colombo in Support of Steering
Committee’s Reply at ¶¶ 13-15, 17 (the “Colombo Declaration”) [ECF No. 258]. The Brazilian
Confirmation Order, according to its terms, is binding on all parties as long as its effects are not
stayed. Supporting Legal Decl. at ¶ 44; Supporting Factual Decl. ¶ 60.
On January 9, 2018, Oi shareholder Pharol and its subsidiary Bratel, issued a statement
that it was requesting a “partial reconsideration” of the Brazilian Confirmation Order (the “Partial
Reconsideration Request”) and calling for an extraordinary shareholders meeting (the
“Extraordinary Meeting”) to deliberate the terms of the Brazilian RJ Plan, among other issues.
Supporting Factual Decl. at ¶ 118. The Brazilian RJ Court rejected the Partial Reconsideration
Request, including the request for the Extraordinary Meeting. Id. Despite this, the Extraordinary
Meeting was held and attended by a number of shareholders, including Pharol and Bratel. Id.
On February 13, 2018, the state public prosecutor filed a request with the Brazilian RJ
Court to suspend the rights of the shareholders who attended and signed the minutes of the
Extraordinary Meeting and that those shareholders be removed from their positions for at least
two years starting from the granting of the judicial reorganization. Id. On March 7, 2018, the
Brazilian RJ Court granted the prosecutor’s request and issued a decision that suspended the
“political rights” of those shareholders who voted at the Extraordinary Meeting and removed the
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members of the Board who were appointed by such shareholders, until the new equity
contemplated by the Brazilian RJ Plan has been issued to creditors. Id. at ¶ 119.
Bratel has taken several appeals from decisions issued by the Brazilian RJ Court,
including, but not limited to, an appeal of the Brazilian RJ Court’s order revoking the power of
the allegedly conflicted members of Oi’s executive officers and the Brazilian RJ Court’s order
vesting authority over the restructuring process in Oi’s CEO. See Objection at 5-7. Bratel has
also appealed the Brazilian Confirmation Order, and that appeal remains pending. Objection at ¶
5. In its appeal of the Brazilian Confirmation Order, Bratel asserts that the Brazilian RJ Court
lacked jurisdiction to rule that a shareholders’ meeting is unnecessary and that the shareholder
rights provided for under Brazilian corporate law are not eliminated or superseded by Brazilian
insolvency law, and therefore confirmation of the Brazilian RJ Plan without shareholder
involvement or participation violated their rights. Objection at ¶ 5.
The Pharol Parties are still actively pursuing their rights in the various proceedings in
Brazil, including Bratel’s appeals of the various decisions made by the Brazilian RJ Court and
other Brazilian courts, as well as Bratel’s pursuit of its interests as equity holders in both the
mediation and the arbitration pending in Brazil.
D. Conditions Subsequent in the Brazilian RJ Plan
The Brazilian RJ Plan sets forth the following conditions subsequent: (1) the restructuring
of certain bondholder credits under the Brazilian RJ Plan shall take place by July 31, 2018; (2) a
contemplated capital increase shall occur by no later than July 31, 2018, and (3) the
contemplated rights offering shall occur no later than February 28, 2019. Supporting Factual
Decl., Exhibit A at § 12.1. The Brazilian RJ Plan provides that the relevant creditors may
approve a waiver or modification of a condition subsequent, by resolution of the holder of a
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simple majority of claims present and voting at a meeting called for the purpose of waiving or
modifying the condition(s) subsequent described above. Id. at § 12.2. Absent a waiver by the
procedure set forth in the Brazilian RJ Plan, failure of any condition subsequent that is not
waived may result in the termination of the Brazilian RJ Plan, at the discretion of the Brazilian
RJ Court following consultation with the judicial administrator and public prosecutors. Id. at ¶
83.
E. The Brazilian Arbitration
At some point, Bratel commenced an arbitration against Oi, pursuant to an arbitration
clause in Section 68 of Oi’s bylaws. Objection at ¶ 6. The arbitration was commenced to,
among other things, call a shareholders meeting to discuss the terms of the Brazilian RJ Plan
affecting shareholders (i.e., dilution, capital increases and corporate governance issues), issues
on which shareholders contend they have a right under Brazilian corporate law to appear and be
heard and to prevent Oi from implementing the terms of the Brazilian RJ Plan that the Pharol
Parties assert violate shareholders’ rights. Objection at ¶ 6.
Oi initiated a proceeding before the Superior Court of Justice to determine which entity—
the Brazilian RJ Court or the arbitrator—has jurisdiction over these issues. Objection at 8. Oi
objected to the arbitration on the basis that only the Brazilian RJ Court has jurisdiction, and
Bratel argued in response that there was no legal basis to transfer jurisdiction from the arbitrator
to the Brazilian RJ Court. Objection at ¶ 6. This jurisdictional question is currently pending
decision. Objection at ¶ 6.
Bratel sought a preliminary injunction in the arbitration. In a decision on March 5, 2018,
the arbitrator issued an order that, among other things, (i) recognized arbitral jurisdiction to
consider the issues raised by Bratel; (ii) suspended the effects of possible approval of any
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resolution resulting from the meeting of Oi’s Board of Directors on March 5, 2018, in which the
Board deliberated on the capital increase, debt exchange, issuance of new shares and
subscription bonus contemplated under the Brazilian RJ Plan. Objection at 8. The arbitrator’s
decision precluded Oi from implementing the capital increase, subject to a monetary penalty. Id.
However, the Superior Court of Justice granted a preliminary injunction at Oi’s request,
staying the effects of the decision rendered by the arbitrator. Objection at 8-9. The Superior
Court of Justice also appointed the Brazilian RJ Court to decide any other preliminary injunction
requests. Objection at 9. Bratel has filed an appeal of this injunction, which is currently
pending. Id. It is the Pharol Parties’ position that the arbitrator’s decision is stayed only as to
the penalty, and that therefore under the arbitrator’s decision Oi may not proceed with the
implementation of the capital increase. Objection at 9.
F. 	The Brazilian Mediation
In addition to the arbitration, on April 2, 2018, the Brazilian RJ Court ordered Oi and
shareholders Bratel and Société Mondiale to participate in mediation in an effort to resolve their
disputes. Objection at ¶ 7. Rejecting Oi’s effort to exclude Société Mondiale from the
mediation, the Brazilian RJ Court issued its decision on April 18, 2018, approving Société
Mondiale’s participation and ordering mediation to proceed. Id. A mediator has been appointed,
and substantive meetings were scheduled throughout the remainder of May. 	All parties to the
mediation, including Oi, were to participate in a joint mediation conference during the week of
May 21, 2018. Objection at ¶ 8.
G. Ancillary Proceedings
In addition to all of the various proceedings in Brazil, certain of the Brazilian RJ Debtors
are subject to ancillary and other plenary restructuring proceedings in various countries.
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Supporting Factual Decl. at ¶ 108. In addition to this U.S. Chapter 15 proceeding, these include
the previously discussed Dutch insolvency proceeding, an English insolvency proceeding and a
Portuguese insolvency proceeding. The Court will provide only a short description of each of
these proceedings, all of which are referenced in more detail in the parties’ submissions.
As to the Dutch insolvency proceeding, Coop and PTIF on April 10, 2018—that is, after
entry of the Brazilian Confirmation Order—offered composition plans to their unsecured creditors
as part of their Dutch bankruptcy proceedings. Id. The voting deadline for the Coop Dutch
composition plan was May 15, 2018, and the voting deadline for the PTIF Dutch composition
plan was April 30, 2018. Id. The Dutch composition plans are consistent in all material respects
with the terms of the Brazilian RJ Plan that was already approved by stakeholders. Id. At a
verification meeting held on June 1, 2018 in the Netherlands, Coop’s creditors voted in favor of
its Dutch composition plan. See Insolvency Trustee’s Statement on the Dutch Proceedings at 2
[ECF No. 271]. With this approval by creditors, the Dutch court is now set to consider the Dutch
composition plans for approval at a further hearing, which will take place between eight and
fourteen days following the already completed verification meeting. Supporting Factual Decl. at
¶ 108.
As for the English recognition proceedings, the High Court of England and Wales issued
orders on June 23, 2017 with respect to Oi, Móvel, and Telemar recognizing the Brazilian RJ
Proceeding as a “foreign main proceeding” in the proceedings opened under the Cross-Border
Insolvency Regulations 2006, which implements the Model Law in Great Britain. See First 1518
Declaration [ECF No. 32] at ¶ 10.
As to the Portuguese recognition proceeding, Oi and Telemar petitioned the Judicial Court
of the Region of Lisbon on November 18, 2016 to recognize the Brazilian RJ Proceeding in
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relation to Oi and Telemar. Supporting Factual Decl. at ¶ 117. On July 11, 2017, that request was
extended to Móvel as well. Id. The Portuguese court granted the petitions with respect to Oi and
Telemar on March 6, 2017, and with respect to Móvel on August 11, 2017. Id.
DISCUSSION
A. Legal Standard:
The stated purpose of Chapter 15 is to “incorporate the Model Law on Cross-Border
Insolvency so as to provide effective mechanisms for dealing with cases of cross-border
insolvency.” 11 U.S.C. § 1501(a). Section 1501(a) provides that Chapter 15 is intended to
serve the following objectives:
(1) cooperation between—
(A) courts of the United States, United States trustees, trustees,
examiners, debtors, and debtors in possession; and
(B) the courts and other competent authorities of foreign
countries involved in cross-border insolvency cases;
(2) greater legal certainty for trade and investment;
(3) fair and efficient administration of cross-border insolvencies
that protects the interests of all creditors, and other interested
entities, including the debtor;
(4) protection and maximization of the value of the debtor’s assets;
and
(5) facilitation of the rescue of financially troubled businesses,
thereby protecting investment and preserving employment.
11 U.S.C. § 1501(a).
“Chapter 15 . . . provides courts with broad, flexible rules to fashion relief that is
appropriate to effectuate the objectives of the chapter in accordance with comity.” In re Rede
Energia S.A., 515 B.R. 69, 91 (Bankr. S.D.N.Y. 2014) (citing In re Bear Stearns High–Grade
Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333–34 (S.D.N.Y.2008); In re
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SPhinX, Ltd., 351 B.R. 103, 112 (Bankr.S.D.N.Y.2006) (Chapter 15 maintains—and in some
respects enhances—the ‘maximum flexibility’ . . . that former Section 304 provided bankruptcy
courts in handling ancillary cases in light of principles of international comity and respect for the
laws and judgments of other nations) (citations omitted), aff'd, 371 B.R. 10 (S.D.N.Y.2007)).
The importance of comity and international cooperation is reflected throughout Chapter 15. As
the House Judiciary Committee stated in its report, “comity is raised to the introductory language
to make clear that it is the central concept to be addressed.” H.R. Rep. No. 109-31, pt. 1, at 109
(2005), as reprinted in 2005 U.S.C.C.A.N. 88, 172; see also 11 U.S.C. § 1509(b)(2)-(3)
(providing that once recognition is granted in the United States, the foreign representative may
apply directly to a court in the United States for appropriate relief in that court and a court in the
United States shall grant comity to the foreign representative); 11 U.S.C. § 1525(a) (providing
that, consistent with Section 1501, the court shall cooperate to the maximum extent possible with
a foreign court or a foreign representative, either directly or through the trustee); Canada S. Ry.
Co. v. Gebhard, 109 U.S. 527, 539 (1883) (“[T]he true spirit of international comity requires that
schemes of this character, legalized at home, should be recognized in other countries.”).
The Foreign Representative here requests that this Court grant comity in the United
States to the Brazilian RJ Plan and the order of the Brazilian RJ Court confirming the Brazilian
RJ Plan. “Federal courts generally extend comity whenever the foreign court had proper
jurisdiction and enforcement does not prejudice the rights of United States citizens or violate
domestic public policy.” See Victrix S.S. Co., v. Salen Dry Cargo A.B., 825 F.2d 709, 713 (2d
Cir. 1987) (citing Hilton v. Guyot, 159 U.S. 113, 202-03 (1895)); see also Cunard S.S. Co. v.
Salen Reefer Servs. A.B., 773 F.2d 452, 456-57 (2d Cir. 1985); In re Atlas Shipping A/S, 404
B.R. 726, 733 (Bankr. S.D.N.Y. 2009). “American courts have long recognized the need to
extend comity to foreign bankruptcy proceedings,” because “[t]he equitable and orderly
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distribution of a debtor’s property requires assembling all claims against the limited assets in a
single proceeding; if all creditors could not be bound, a plan of reorganization would fail.”
Victrix, 825 F.2d at 713-14; see also Finanz AG Zurich v. Banco Economico S.A., 192 F.3d 240,
246 (2d. Cir. 1999); In re Maxwell Commc’n Corp., 93 F.3d 1036, 1048 (2d Cir. 1996); Salen
Reefer, 773 F.2d at 458; OUI Fin. LLC v. Dellar, 2013 WL 5568732, at *5 (S.D.N.Y Oct. 9,
2013).
The burden rests on the Foreign Representative to demonstrate that he is entitled to the
requested relief. See, e.g., In re Sivec SRL, as successor in liquidation to Sirz SRL, 476 B.R.
310, 323 ( Bankr. E.D. Okla. 2012) (“The burden of proof is on the party urging comity.”)
(citing Reserve Intern. Liquidity Fund, Ltd. v. Caxton Intern. Ltd., 2010 WL 1779282 at *13
(S.D.N.Y., Apr. 29, 2010); CSL Australia Pty. Ltd. v. Brittania Bulkers PLC, No. 08-
8290, 2009 WL 2876250 at *3 (S.D.N.Y., Sept. 8, 2009) (“The burden of establishing
international comity rests on the party asserting it.”) (citation omitted); see also Fox v.
Bank Mandiri (In re Perry H. Koplik & Sons, Inc.), 357 B.R. 231, 239 (Bankr. S.D.N.Y.
2006) (noting that “the moving party carries the burden of proving that comity is appropriate”)
(citation omitted).
Two sections of the Bankruptcy Code, Sections 1521(a) and 1507, are relevant to the
Court’s analysis. 	“It is evident that recognition assistance of the types available under [these]
sections is ‘largely discretionary and turns on subjective factors that embody principles of
comity.’” In re Rede, 515 B.R. at 91 (quoting In re Toft, 453 B.R. 186, 190 (Bankr. S.D.N.Y.
2011); see also In re Bear Stearns, 389 B.R. at 333. The determination of whether to enforce a
plan confirmed in a foreign proceeding should be made on a case-by-case basis. See In re Treco,
240 F.3d 148, 156 (2d Cir. 2001) (stating with respect to former Section 304 that “[a]lthough
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some of the considerations in determining whether to defer to a certain country's bankruptcy
proceedings may be constant from case to case, other factors vary.”); In re Bd. of Directors of
Telecom Argentina, S.A., 528 F.3d 162, 174 (2d Cir. 2008) (making ruling under former Section
304 “based on the specific facts of this case and in light of all the circumstances”) (citing In re
Treco, 240 F.3d at 156); In re Garcia Avila, 296 B.R. 95, 107-08 (Bankr. S.D.N.Y. 2003) (in
making determination under former Section 304, stating that “court must apply the factors on a
case-by-case basis. Accordingly, a prior decision to defer to a particular foreign court in one case
is not determinative in different case.”) (citing In re Treco, 240 F.3d at 154, 156).
1. 	Section 1521(a)
Section 1521(a) of the Bankruptcy Code provides that “[u]pon recognition of a foreign
proceeding, . . . where necessary to effectuate the purpose of this chapter and to protect the assets
of the debtor or the interests of the creditors, the court may, at the request of the foreign
representative, grant any appropriate relief. . . .” 11 U.S.C. § 1521(a). Such “appropriate relief”
includes a non-exhaustive list of certain types of relief that is enumerated by the statute,
including “any additional relief that may be available to a trustee, except for relief available
under sections 522, 544, 545, 547, 548, 550, and 724(a).” 11 U.S.C. § 1521(a)(7). Courts have
found such “appropriate relief” to be the same type of relief that was previously available under
Chapter 15’s predecessor, Section 304 of the Bankruptcy Code. In re Vitro S.A.B. de C.V., 701
F.3d 1031, 1054 (5th Cir. 2012). The Court may grant relief under Section 1521(a) “only if the
interests of the creditors and other interested entities, including the debtor, are sufficiently
protected.” 11 U.S.C. § 1522(a). Courts have acknowledged that “the policy underlying section
1522 is that there should be ‘a balance between relief that may be granted to the foreign
representative and the interests of the person that may be affected by such relief.’” In re Rede,
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515 B.R. at 90 (quoting In re Int'l Banking Corp. B.S.C., 439 B.R. 614, 626
(Bankr.S.D.N.Y.2010)); see also Jaffé v. Samsung Elecs. Co., 737 F.3d 14, 27-28 (4th Cir. 2013)
(“The analysis required by § 1522(a) is . . . logically best done by balancing the respective
interests based on the relative harms and benefits in light of the circumstances presented, thus
inherently calling for application of a balancing test. . . .”).
2. 	Section 1507
Section 1507 of the Bankruptcy Code also permits the Court to grant post-recognition
relief in the form of “additional assistance to a foreign representative under this title or under
other laws of the United States.” 11 U.S.C. § 1507(a). Section 1507 provides that the Court, in
its discretion, may grant the “additional assistance,” only after balancing the various factors set
forth in Section 1507(b). See 11 U.S.C. § 1507. In determining whether to provide such relief, a
court
shall consider whether such additional assistance, consistent with the principles of
comity, will reasonably assure--
(1) just treatment of all holders of claims against or interests in the debtor's
property;
(2) protection of claim holders in the United States against prejudice and
inconvenience in the processing of claims in such foreign proceeding;
(3) prevention of preferential or fraudulent dispositions of property of the debtor;
(4) distribution of proceeds of the debtor's property substantially in accordance
with the order prescribed by this title; and
(5) if appropriate, the provision of an opportunity for a fresh start for the
individual that such foreign proceeding concerns.
11 U.S.C. § 1507(b). Thus, the language of Section 1507(b) explicitly incorporates the principle
of comity in a court’s consideration of whether to grant additional assistance. See id.
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B. Analysis Under Sections 1521 and 1507 of the Bankruptcy Code
In the Motion, the Chapter 15 Debtors rely on both Section 1521 and Section 1507. See
Motion ¶¶ 121-122. The Pharol Parties appear to agree that these sections govern here. See
Objection ¶¶ 14, 16-17. But the Pharol Parties disagree with the Chapter 15 Debtors as to
whether the Court should exercise its discretion under these provisions to grant comity in the
United States to the Brazilian RJ Plan—and related relief—while there are still proceedings
pending in Brazil. See Objection ¶ 14. Applying the applicable legal principles to the facts of
the case at hand, the Court finds that the Chapter 15 Debtors have satisfied the requirements for
relief under both Section 1521 and 1507 and, therefore, will grant the Motion, notwithstanding
the proceedings still pending in Brazil.
As to Section 1521, the Court finds that the relief requested by the Foreign
Representative is “appropriate relief” under Section 1521(a)(7) because it is the type of relief that
was available under former Section 304 and routinely granted under U.S. law. See In re Rede,
515 B.R. at 92-93 (finding that relief to enforce Brazilian plan is proper under Section 1521)
(citing In re Vitro, 701 F.3d at 1054). For instance, the Foreign Representative requests that this
Court give full force and effect and grant comity in the United States to the Brazilian RJ Plan,
including enjoining acts in the United States that would interfere with the Brazilian RJ Plan or
the Brazilian Confirmation Order. See Foreign Representative Motion for Order Granting Relief
to Enforce the Brazilian Reorganization Plan [ECF No. 232] at 59-62. This is the type of relief
that courts have previously granted under former Section 304 of the Bankruptcy Code and other
applicable U.S. law. See In re Rede, 515 B.R. at 93 (citing Bd. of Dirs. of Telecom Arg., 528
F.3d at 174–76; In re Avila, 296 B.R. at 114–15; 11 U.S.C. § 1141(d)(1)(A) (granting discharge
to Chapter 11 debtor upon confirmation except as otherwise provided for in the plan); 11 U.S.C.
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§ 524(a) (describing the effect of a discharge)). Similarly, the requests for instructions directing
the Indenture Trustee to take certain actions with respect to securities in accordance with the
terms of the Brazilian RJ Plan, is also relief of a type available under U.S. law. See In re Rede,
515 B.R. at 93 (citing 11 U.S.C. § 1142(b) (providing that a court “may direct ... any ...
necessary party to execute or deliver or join in the execution or delivery of any instrument
required to effect a transfer of property dealt with by a confirmed plan, and to perform any other
act ... that is necessary for the consummation of the plan”); In re Washington Mut., Inc., 2012
WL 1563880 at *38 (Bankr. D. Del. Feb. 24, 2012) (directing indenture trustee to make
distributions in order to effectuate plan transactions)).
Moreover, the Court finds that it is appropriate to exercise its discretion under Section
1521 to grant comity to the Brazilian RJ Plan. That plan is the culmination and ultimate
resolution of the extensive Brazilian RJ Proceeding that was already granted recognition by this
Court. It is impossible for the Brazilian RJ Plan to be fully consummated without granting
recognition given the conditions subsequent in the plan. These conditions subsequent include,
among other things, the issuance of U.S. securities, which cannot take place without an order
granting the relief requested by the foreign representative. Granting the Foreign
Representative’s Motion is, therefore, essential to implementation of the restructuring and
complete distributions and therefore consummation of the Brazilian RJ Plan. In granting the
requested relief, the Court notes that the Brazilian RJ Plan is overwhelmingly supported by the
stakeholders in the case, and that all stakeholders have had the opportunity to be heard in the
Brazilian RJ Proceeding and to protect their rights under Brazilian law. As to the Pharol Parties,
this is amply demonstrated by the extensive proceedings involving them in Brazil, including
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Bratel’s appeals of decisions of the Brazilian RJ Court, as well as the existence of the arbitration
and mediation in Brazil.
In addition, the Court also concludes that the relief requested by the Foreign
Representative here properly constitutes “additional assistance” pursuant to Section 1507 of the
Bankruptcy Code. Specifically, the relief requested by the Foreign Administrator meets each of
the factors in Section 1507.
The first factor of Section 1507(b) examines whether the additional assistance will
reasonably assure “just treatment of all holders of claims against or interests in the debtor’s
property.” 11 U.S.C. § 1507(b)(1). Case law relating to former Section 304(c) found this
requirement to be satisfied where the foreign insolvency law provides a comprehensive
procedure for the orderly resolution of claims and the equitable distribution of assets among all
of the estate’s creditors in one proceeding. See, e.g., In re Treco, 240 F.3d at 158; In re Culmer,
25 B.R. 621, 629 (Bankr. S.D.N.Y. 1982). As described in greater detail in the Supporting Legal
Declaration, Brazilian bankruptcy law provides such a comprehensive procedure, while at the
same time maintaining the company´s business and activities. Supporting Legal Decl. at ¶¶ 4-5,
15. Consensual approval of a plan under Brazilian law requires votes from a specified majority
of each class of claims. Id. at ¶ 33. This requirement has been met because all classes under the
Brazilian RJ Plan voted overwhelmingly in its favor.
Brazilian bankruptcy law also provides additional creditor protections that justify
granting comity in these circumstances. For instance, under Brazilian bankruptcy law creditors
have the right to object to a plan within 30 business days after notice of its publication. Id. at ¶
23. Creditors may also oppose a plan and propose amendments thereto during the GCM, up until
a final approval by creditors. Id. at ¶ 27. Additionally, within five days of publication of a
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confirmation order, creditors may file a motion for clarification, and, within fifteen days of its
publication, creditors may file an interlocutory appeal to the appellate court. Id. at ¶ 43.
Creditors are also given notice of decisions made by the Brazilian RJ Court, with the deadlines
for filing appeals commencing from the date on which creditors are notified of such decision by
means of a publication. Id. A judicially appointed administrator also provides additional
oversight of the process, ensuring that accurate information is distributed to the creditors and
informing the Brazilian RJ Court if a debtor fails to meet its obligations under a confirmed plan
or commits an act that violates the Brazilian bankruptcy law. Id. at ¶ 15-17, 39.
The second factor in favor of granting comity under Section 1507 requires that the
additional assistance reasonably assure “protection of claim holders in the United States against
prejudice and inconvenience in the processing of claims in such foreign proceeding.” 11 U.S.C.
§ 1507(b)(2). This factor is satisfied where, as here, creditors are given adequate notice of the
timing and procedures for filing claims, and such procedures do not create additional burdens for
a foreign creditor seeking to file a claim. See, e.g., Treco, 240 F.3d at 158; In re Hourani, 180
B.R. 58, 68 (Bankr. S.D.N.Y. 1995). Under Brazilian bankruptcy law, foreign creditors have the
same status, the same rights and protections, and are subject to the same procedures, as local
creditors with respect to the filing of claims. Supporting Legal Decl. at ¶ 12. Upon issuing the
decision to accept a debtor’s petition for judicial reorganization under Brazilian bankruptcy law,
a Brazilian judge orders the publication of the decision along with a list of creditors presented by
the debtor. Id. at ¶ 10. Within 15 business days from the publication of such list, the creditors
may present their proofs of holdings or objections to such list. Id. After analyzing the proof of
holdings and objections, the judicial administrator will publish a second creditors´ list, to which
all creditors, the debtors or the public prosecutor´s office may present new objections within 10
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business days of publication. Id. The Brazilian court then rules on any objections filed and
orders the presentation of the final list of creditors and claims. Id.
The third factor in Section 1507(b) requires that the additional assistance requested
reasonably assures “prevention of preferential or fraudulent dispositions of property of the
debtor.” 11 U.S.C. § 1507(b)(3). This factor is satisfied here given that—when a debtor is
declared bankrupt under Brazilian law—any creditor, the Brazilian public attorney’s office or the
judicial administrator may bring an action to avoid transfers that were made to third parties with
the intention to harm creditors or damage the debtor’s estate. Id. at ¶ 19.
The fourth factor of Section 1507(b) requires that the additional assistance reasonably
assures “distribution of proceeds of the debtor’s property substantially in accordance with the
order prescribed by” the Bankruptcy Code. 11 U.S.C. § 1507(b)(4); see also In re Gee, 53 B.R.
891, 904 (Bankr. S.D.N.Y. 1985); Haarhuis v. Kunnan Enters., Ltd., 177 F.3d 1007 (D.C. Cir.
1999) (Taiwanese distribution system was substantially in accordance with U.S. law because
priority afforded to certain classes of claims as under the Bankruptcy Code). This factor requires
simply that the “foreign distribution scheme be ‘substantially in accordance’ with United States
bankruptcy law; it does not have to mirror the United States distribution rules.” In re Ionica, 241
B.R. 829, 836 (Bankr. S.D.N.Y. 1999) (citations omitted). 	This factor is satisfied here because
the distribution scheme under Brazilian bankruptcy law substantially accords with the
distribution scheme under the Bankruptcy Code. In a consensually approved Brazilian plan
(without the use of “cram-down” provisions), for example, the claims of affected creditors are
paid in accordance with the plan, which must be approved by all classes of creditors, including
secured creditors and unsecured creditors. Supporting Legal Decl. at ¶¶ 27, 33. The Bankruptcy
Code ensures that secured creditors receive priority over unsecured creditors, and under the
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Brazilian RJ Plan, secured creditors are entitled to payment in full. Additionally, Brazilian
bankruptcy law provides “meaningful protections that are similar to the protections embodied in
U.S. law,” and the Brazilian RJ Plan’s different treatment of certain unsecured creditors has a
reasonable basis and was necessary to consummate the RJ Plan. See In re Rede, 515 B.R. at 97.
The Court also finds that granting comity to the Brazilian RJ Plan is appropriate because
it ensures that the Brazilian RJ Plan will be implemented in a manner consistent with its terms
and without unnecessary delay and costs.
In granting comity to the Brazilian RJ Plan and the Brazilian Confirmation Order, the
Court notes that comity is most often withheld when the recognition of foreign proceedings
would be adverse to the public policy interests of the United States. See 11 U.S.C. § 1506
(“Nothing in this chapter prevents the court from refusing to take an action governed by this
chapter if the action would be manifestly contrary to the public policy of the United States.”); see
also Somportex, Ltd. v. Phila. Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971); Salen
Reefer, 773 F.2d at 457 (citing Somportex, 453 F.2d at 440). But this and other courts have
found that Brazilian bankruptcy law is consistent with U.S. policy and provides to creditors
meaningful protections similar to those provided under U.S. law. See, e.g., In re Rede, 515 B.R.
at 98 (rejecting argument that Brazilian bankruptcy proceedings there violated Section 1506 and
concluding that “Brazilian bankruptcy law meets our fundamental standards of fairness and
accords with the course of civilized jurisprudence.”); In re OAS S.A., 533 B.R. 83, 103 (Bankr.
S.D.N.Y. 2015) (noting that “Brazil has a comprehensive bankruptcy law that in many ways
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mirrors our own” and agreeing with the Rede decision that Brazilian bankruptcy law is not
contrary to U.S. public policy).2
For all these reasons, then, the Court finds that the Brazilian RJ Proceeding is not
contrary or prejudicial to the interests of creditors in the United States and that the doctrine of
comity supports the granting of permanent relief enforcing the Brazilian RJ Plan and the
Brazilian Confirmation Order under Sections 1507 and 1521 of the Bankruptcy Code.3
C. Pharol Parties’ Objection
The Court now turns to the specific arguments raised by the Pharol Parties. The Pharol
Parties generally assert that granting the relief requested by the Foreign Representative would be
inconsistent with the purposes of Chapter 15, and that the Court should instead delay granting
any relief until after all of the proceedings in Brazil are completed, including the appeals, the
arbitration and the mediation. See Objection at ¶ 13. This argument takes several forms.
As a threshold matter, the Pharol Parties suggest that the Foreign Representative is trying
to rush these enforcement proceedings through the Court too quickly. But this is wrong on
several levels. The Foreign Representative’s Motion was scheduled on ordinary notice in this
Court and all interested parties were given a chance to be heard. Moreover, the Brazilian RJ
Plan was confirmed over four months prior to the hearing on the Motion and all parties in
interest have had at least that much notice of the plan’s milestones and timeline, which were
expressly incorporated in the Brazilian RJ Plan. Even before that point, multiple creditor
2 	In fact, the Pharol Parties have not argued that the relief requested here would violate the public policy
interests of the United States.
3 	The Court also finds that the other relief requested by the Foreign Representative is appropriate under the
circumstances, including the requested injunctions, exculpations, and exemption relief under Section 1145 of the
Bankruptcy Code. As this additional relief is not subject to a specific objection by the Pharol Parties, the Court will
refrain from a detailed analysis as to each of these requests for relief.
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constituencies were involved in active negotiations with the Brazilian RJ Debtors for months
about the mechanics of any plan. To suggest that the Chapter 15 Debtors are now seeking an
expedited request here to somehow short-circuit the process in Brazil is a clear
mischaracterization of the facts.
Additionally, the Pharol Parties provide no timeline for how long this Court should wait
until deciding the Foreign Representative’s Motion. See Objection at 21 (subsection caption
stating that: “The Enforcement Motion should be adjourned until all appeals, arbitration and
mediation proceedings have been exhausted in Brazil.”). In the face of a complaint by the
Chapter 15 Debtors about the lack of any temporal limits to the Pharol Parties’ approach, the
Pharol Parties suggested at the hearing on the Motion that the Court simply delay proceedings
until a further status conference on June 18, 2018. See Hr’g Tr. 78:3-6, May 29, 2018 (counsel
for the Pharol Parties suggesting that parties come back for a status conference on June 18th
when they might have a clearer picture on unresolved issues). Such a timeline would be highly
problematic, however, as this is only a few days’ prior to the deadline for at least two of the
conditions subsequent that require relief from this Court to implement. Moreover, this approach
would effectively provide the very same stay pending appeal that the Pharol Parties sought and
were denied by the Brazilian courts. It is not this Court’s role to effectively second-guess or
overrule the determinations made by the Brazilian courts, particularly under the guise of comity.
Perhaps to address these problems, the Pharol Parties suggest that the Chapter 15 Debtors
call a meeting to allow creditors to vote on waiving the deadlines contained in the Brazilian RJ
Plan. As a threshold matter, such an approach is exceedingly unlikely to offer a lasting solution
here. See Hr’g Tr. 81:12-19, May 29, 2018 (counsel to the Foreign Representative noting that
“to let all of the so-called unfinished business in Brazil play out” could take years). But it is also
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exceedingly unlikely to work. As counsel to the Steering Committee noted at the hearing on the
Motion, such a meeting would be extremely difficult to convene due to the thousands of creditors
involved in the case and, in any case, his own client is currently not prepared to extend or waive
the deadlines in the Brazilian RJ Plan. See Hr’g Tr. 85:5-15, May 29, 2018. That is not
surprising given that the Brazilian RJ Plan was approved only after a lengthy and highly
contentious process, and the deadlines contained therein were heavily negotiated. See id.
Against this backdrop, the possibility of getting all creditors to vote in favor of delay—much less
the extended delay sought by the Pharol Parties—is highly implausible. More importantly, it
would be starkly at odds with comity for this Court to insert itself into the Brazilian process in
such an intrusive way by effectively requiring the Brazilian RJ Debtors to convene another
meeting of creditors. See SNP Boat Serv. S.A. v. Hotel Le St. James, 483 B.R. 776, 786 (S.D.
Fla. 2012) (“To inquire into a specific foreign proceeding is not only inefficient and a waste of
judicial resources, but more importantly, necessarily undermines the equitable and orderly
distribution of a debtor's property by transforming a domestic court into a foreign appellate court
where creditors are always afforded the proverbial ‘second bite at the apple.’ Chapter 15's
directive that courts be guided by principles of comity was intended to avoid such a result.”).
The Pharol Parties note that both Section 1521 and Section 1507 incorporate a balancing
test, which they argue weighs in their favor. But these tests actually weigh against their position.
As detailed above, the Brazilian RJ Debtors, various parties in interest and numerous creditor
constituencies were involved in extensive negotiations regarding the terms of the Brazilian RJ
Plan. These negotiations were ultimately successful, as the vast majority of creditors voted
overwhelmingly in favor of the Brazilian RJ Plan. The Brazilian RJ Plan has been confirmed
and such confirmation has not been stayed by the Brazilian courts. Numerous creditors have
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acted in reliance on the timely consummation of the transactions required by the Brazilian RJ
Plan. Denying the relief requested by the Foreign Representative would work to the detriment of
these vast creditor constituencies, instead serving only the parochial interests of the Pharol
Parties. Indeed, three major creditor constituencies—the Steering Committee, the International
Bondholder Committee and Solus—have all filed pleadings supporting the relief requested by
the Foreign Representative. To grant the objection would essentially give the Pharol Parties—
that do not even claim to speak for the interests of all shareholders—a pocket veto over the entire
process, notwithstanding the wishes of the vast majority of stakeholders.
Relatedly, the Pharol Parties suggest that granting the Foreign Representative’s request
would “create[] a significant risk of legal and commercial uncertainty surrounding the outcome
of the pending appeals in Brazil.” Objection at ¶ 31. As a basis for this argument, the Pharol
Parties posit that if it were to ultimately succeed in its appeals, the transactions that took place in
the United States would have to be unwound. Id. But courts in this jurisdiction have granted
plan enforcement orders despite the pendency of appeals in the foreign main proceeding. See In
re Ocean Rig UDW Inc., Case No. 17-10736 (MG) (Bankr. S.D.N.Y. Sept., 20, 2017) (granting
full force and effect to scheme approved in Cayman Islands despite pending action by a creditor
for a fraudulent transfer claim); In re Sino-Forest Corp., 501 B.R. 655, 666 (Bankr. S.D.N.Y.
2013) (enforcing Canadian reorganization plan and settlement over objection of party pursuing
appeals in Canada and stating that possible appeal in Canada was not a “reason to wait” and that
“at least one additional ruling is required from the trial court in Canada, seeking approval of a
plan of distribution, before the settlement can become final, so this Court’s ruling does not
provide the last word in any event.”); In re Rede, 515 B.R. at 95 (balancing the foreign debtor’s
interests against those of objecting party and concluding that plan enforcement relief meets the
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requirements of Sections 1522(a) and 5121 of the Bankruptcy Code, and noting that party
objecting to plan enforcement relief “simply wants another chance to renegotiate the terms of the
Brazilian Reorganization Plan,” and that granting such relief “does not prevent the [objector]
from continuing to assert its rights under Brazilian law in the pending appeals of the decisions of
the Brazilian Bankruptcy Court.”); In re Gerova Financial Group, Ltd., 482 B.R. 86, 94 (Bankr.
S.D.N.Y. 2012) (holding in context of recognition proceeding that nothing in statutory language
of Chapter 15 required that a decision of a foreign court be final or non-appealable).
Moreover, the Court disagrees with the Pharol Parties’ premise about uncertainty arising
out of a grant of the Motion. In fact, failure to grant the Motion and implement the Brazilian RJ
Plan by the deadlines provided would cause more uncertainty. It would seriously risk the failure
of the restructuring under Brazilian law and create the possibility of a mandatory liquidation of
the Oi Group. That is because the Brazilian RJ Debtors’ proceeding may be converted to a
bankruptcy liquidation proceeding known as a falido following the occurrence of certain events,
one of which is the failure of the Brazilian RJ Debtors to comply with the terms of an approved
and confirmed judicial reorganization plan. Supplemental Legal Decl. ¶ 13. Following
conversion to such a proceeding, a debtor is declared not capable of reorganizing and the
debtor’s assets are placed into liquidation. Id. Thus, denial of the Motion would put at risk the
entire global restructuring of the Brazilian RJ Debtors and their non-debtor affiliates.
Moreover, a delay in granting the Motion would adversely affect creditors that are
holding over USD $20 billion in restructured debt, including over USD $5 billion in New York
law-governed bonds that have already been novated by the Brazilian RJ Plan under Brazilian
law, and are entitled under the plan to receive a distribution of new securities. Foreign
Representative’s Reply to Objection of Pharol at ¶ 5 [ECF No. 253]. 	Without a grant of the
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relief requested by the Foreign Representative, the Oi Group will be unable to successfully
restructure its New York law-governed debt per the terms of the Brazilian RJ Plan. As explained
above, the Brazilian RJ Plan has a timeline by which certain conditions subsequent must occur
for the plan to become effective. The Brazilian RJ Plan provides that the non-occurrence of
these events by July 31, 2018 results in termination of the plan. See Brazilian RJ Plan § 12.1,
attached as Exhibit A to the Supporting Factual Declaration [ECF No. 230-1]. These conditions
require, among other things, the issuance of U.S. securities, which cannot take place without this
Court granting the relief requested by the Foreign Representative. Granting the Foreign
Representative’s Motion is, therefore, a prerequisite to implementation of the restructuring and
complete distributions, and therefore consummation of the Brazilian RJ Plan. Importantly, the
steps and timeline discussed above were incorporated in the Brazilian RJ Plan, which was
subsequently approved by the Brazilian court in the Brazilian Confirmation Order. A delay in
granting the relief requested could result in those parties having their claims discharged in Brazil,
but not in the United States, which in turn could lead to the Chapter 15 Debtors facing lawsuits
in the United States for debts that have already been discharged under Brazilian law. Foreign
Representative’s Reply to Objection of Pharol at ¶ 5. 	The equities therefore clearly weigh in
favor of granting the relief that these creditors approved of through their votes in favor of the
Brazilian RJ Plan.
A grant of the Motion now is also consistent with the notion that Chapter 15 affords
greater deference after the recognition of a foreign proceeding:
Once a case is recognized as a foreign main proceeding, [C]hapter 15 specifically
contemplates that the court will exercise its discretion consistent with principles
of comity. There is a logical reason for this. Deference to foreign insolvency
proceedings will often facilitate the distribution of the debtor's assets in an
equitable, orderly, efficient, and systematic manner, rather than in a haphazard,
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erratic, or piecemeal fashion. Chapter 15 mandate[s] that the court cooperate 'to
the maximum extent possible' with a foreign court or representative . . . .
In re Atlas Shipping, 404 B.R. at 738-39 (internal citations and quotations omitted). As noted by
the Foreign Representative, “the Chapter 15 Court’s role is to assist the foreign insolvency
proceeding, not to supervise it.” Foreign Representative’s Reply to Objection of Pharol at 2.
This Court finds that, considering all the circumstances of this case, the issues of Brazilian law
should be resolved by the Brazilian courts, including the question of whether the pending
litigation in Brazil justifies a stay of the Brazilian RJ Plan.
Thus, if the Pharol Parties believe that pending proceedings in Brazil should prevent
enforcement of the Brazilian RJ Plan, then the proper recourse would be to seek relief from the
Brazilian courts in the form of a stay. But the Brazilian courts have denied such requests for a
stay, knowing full well the consequences.4 See Colombo Declaration at ¶¶ 13-15, 17, 20 (noting
lack of stay effect of Brazilian court orders and affirmative denial of stays by Brazilian courts);
Hr’g Tr. 12:13-17, May 29, 2018 (parties agree that there is no stay in place in Brazil); id. at
48:5-9 (Pharol Parties’ counsel stating that they were unsuccessful in obtaining stay pending
appeal in Brazil and that Brazilian arbitration and mediation do not implement a stay). Having
failed to obtain such relief in Brazil, the Pharol Parties should not now indirectly be granted what
they failed to obtain directly. “A U.S. bankruptcy court is not required to make an independent
determination about the propriety of individual acts of a foreign court.” In re Metcalfe &
Mansfield Alternative Investments, 421 B.R. 685, 697 (Bankr. S.D.N.Y. 2010); see In re
Fairfield Sentry Ltd., 484 B.R. 615, 628 (Bankr. S.D.N.Y. 2013) (“Chapter 15 was not designed
4 	The Pharol Parties complain that granting the relief now would frustrate processes overseas such as the
mediation. See Objection at ¶ 23. But as the Brazilian courts that ordered the mediation also refused to grant a stay
of the confirmation order, it is difficult to see how the existence of the mediation weighs in favor of the Pharol
Parties.
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to permit parties to mix and match multiple countries’ laws, which would lead to haphazard,
erratic or piecemeal adjudication of the distribution of assets . . . as the administration and
disbursement of the same assets would be handled by different tribunals in different countries
according to different laws . . . .”). It is simply not this Court’s role to second guess the wisdom
of the Brazilian courts or overrule their decisions, which would be fundamentally inconsistent
with comity. See, e.g., SNP Boat Serv., 483 B.R. at 786; c.f. In re Rede, 515 B.R. at 100 (stating
with respect to public policy exception of Section 1506 that “it is not appropriate for this Court
to superimpose requirements of U.S. law on a case in Brazil or to second-guess the findings of
the foreign court.”).5
The Pharol Parties try to distinguish the cases that grant relief similar to that being sought
here—such as in the Rede and Gerova cases—by arguing that the Brazilian RJ Plan here has not
yet been substantially consummated in Brazil, and that this Court would be the vehicle through
which substantial consummation was achieved. But the Pharol Parties’ attempt to distinguish
these cases—particularly Rede—are unavailing. The principles of comity behind those decisions
are very much at odds with the Pharol Parties’ position. Indeed, other cases in this jurisdiction
have enforced foreign orders approving plans before those plans have become effective. See,
e.g., Bibby Offshore Services Plc, No. 17-13588 (MG) (Bankr. S.D.N.Y. Jan. 18, 2018) [ECF
Nos. 2, 16] (recognizing, granting comity to, and entitling “full force and effect” to scheme of
arrangement where the “Restructuring contemplated by the Scheme…which [would] only be
implemented through the Scheme if the Noteholders vote[d] to approve the Scheme…and
5 	Of course, the Court takes no position on the merits of the Pharol Parties’ appeals or other proceedings in
Brazil. Despite the Pharol Parties having attached no less than four legal opinions regarding Brazilian law to its
papers, the parties here actually have agreed that these issues of Brazilian law are not for this Court to decide. See
Objection at ¶ 21 n.14 (noting that the Pharol Parties offer the opinions not for the purpose of asking the Court to
revisit the Brazilian Confirmation Order or to prejudge the outcome of the appeals, but rather to establish that the
appeals are not frivolous).
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sanctioned by the English Court” was not yet carried out, with court stating that “[a]bsent the
requested relief, the efforts of the Debtor, the English Court, and the Petitioner in conducting the
UK Proceeding and effecting the Restructuring under the Scheme and English law may be
thwarted by the actions of certain creditors, a result inimical to the purposes of chapter 15.”); In
re Odebrecht Óleo e Gas S.A., No. 17-13130 (JLG) (Bankr. S.D.N.Y. Dec. 13, 2017) [ECF Nos.
4, 28] (giving full force and effect to “Brazilian Confirmation Order and the Brazilian
Reorganization Plans” where Brazilian Reorganization Plans had not been consummated or
effectuated, but petitioner was seeking assistance from the court “pertaining to the actions
necessary to give effect to the terms of the Brazilian Reorganization Plans, including…exchange
of the Existing Securities…in consideration for the issuance of the New Securities”); In re CGG
S.A., 579 B.R. 716, 720 (Bankr. S.D.N.Y. 2017) (“[E]nforcement of the Sanctioning Order is
necessary to ensure that the Financial Restructuring contemplated by the Safeguard Plan and the
confirmed Chapter 11 plan can be implemented.”). Furthermore, the Pharol Parties’ argument is
counterintuitive, since the relief requested by the Foreign Representative is necessary for
substantial consummation to take place in Brazil. The Chapter 15 Debtors assert that they would
be in violation of U.S. securities law if they were to try to substantially consummate the
Brazilian RJ Plan by making distributions of new securities to bondholders without obtaining
prior relief from this Court.
The Pharol Parties also argue that the absence of the equitable mootness doctrine in
Brazil should weigh against this Court granting relief.6 But it is hard to see how this supports the
Pharol Parties’ position. The Brazilian courts are no doubt aware that this doctrine does not exist
6 	The Objection appears to be inconsistent on the issue of equitable mootness. On the one hand, it complains
that the relief sought here could render foreign appeals moot while, on the other hand, it states that Brazilian law
does not recognize the doctrine of equitable mootness. See Objection at ¶¶ 19-20.
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in Brazil and nonetheless decided to deny a stay of the order approving the Brazilian RJ Plan.
Should the Pharol Parties prevail in their legal challenges, there are undoubtedly provisions in
both Brazilian and U.S. law that will govern proceedings going forward in both countries and the
scope of appropriate relief. In the event that the Brazilian Confirmation Order is reversed on
appeal, the Pharol Parties have acknowledged that they can seek relief in this Court including,
but not limited to, relief under Rule 60(b)(5) of the Federal Rules of Civil Procedure. See
Objection ¶ 22 n.16.; see also In re Oi Brasil Holdings Cooperatief, 578 B.R. at 203 (“Chapter
15 maintains, and in some respects enhances, the ‘maximum flexibility’ of bankruptcy courts in
handling ancillary cases in light of principles of international comity and respect for the laws and
judgments of other nations.”); 11 U.S.C. § 1522 (bankruptcy court may “modify or terminate”
relief it has previously granted); In re SPhinX, 351 B.R. at 112 (“This flexibility is evident not
only in the policy statement in section 1501(a) but also in Bankruptcy Code section 1522, which
provides that the Court may grant or modify interim . . . or additional relief[.]”). Conversely, if
this Court does not grant the Pharol Parties the delay that they request, there will be no change to
the status quo in the Brazilian litigation and the Pharol Parties’ rights in Brazil are unaffected.
Lastly, the Pharol Parties raised an issue at the hearing with respect to certain language
contained in the Foreign Representative’s proposed order relating to the Motion. This language
provided that if the Brazilian RJ Plan were ever terminated under Brazilian law, then the order of
this Court granting the relief requested by the Foreign Representative and all actions
contemplated thereby would be, “null and void and of no force or effect.” Blackline Against
First Proposed Order at ¶ 16 [ECF No. 269-2]. 	The Pharol Parties suggested that this language
would somehow differ from the ex tunc and void ab initio effect that the Pharol Parties believe
would be appropriate under Brazilian law. The language in the proposed order, however, has
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been further revised to incorporate the Pharol Parties’ concerns, and now additionally provides
that in the event of a termination of the Brazilian RJ Plan, this Court’s order would “be deemed
void ab initio to the extent rendered as such under Brazilian law.” Id. Moreover, as the Court
stated at the hearing, the Pharol Parties can always return to this Court to protect their rights
under U.S. law to the extent necessary, a fact the Pharol Parties recognize. See, e.g., Objection at
20 n.16. For these reasons, therefore, the Court finds that any legitimate issues raised by the
Pharol Parties as to the proposed order have been properly addressed.
CONCLUSION
For all these reasons, the Court grants the Motion and the relief requested by the Foreign
Representative and overrules the Objection in its entirety.
Dated: New York, New York
July 9, 2018
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
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