After converting debt to equity and once holding ~40%, PIMCO is accused of shaping Oi’s board and management to favor creditor recovery over corporate stability
Fight centers on Oi’s 27.2% stake in V.tal — Oi wants a cash auction, while a PIMCO-led creditor group seeks to take the asset via debt cancellation.
Courts have seized PIMCO-linked notes tied to labor claims, Oi is suing for alleged abuse of control, and outcome may define limits of creditor influence in major restructurings
By Jarrett Banks
When Pacific Investment Management Co. known as PIMCO, first built its position in 2016 in Brazilian telecom firm Oi (the Portuguese word for hey) the country was in a very different political and financial climate.
Brazil was emerging from a recession under President Michel Temer, who consequently went all out to entice foreign capital into the country. That posture broadly continued during the Jair Bolsonaro administration, when asset sales, restructuring flexibility and creditor assertiveness were largely viewed as necessary medicine for a heavily indebted corporate sector.
Nearly a decade later, that environment has shifted. Under President Luiz Inácio Lula da Silva, Brazil’s political tone has turned less accommodating to aggressive creditor strategies and more attuned to labor, social and public-interest concerns. Against that backdrop, PIMCO’s long involvement in Oi’s restructuring has become the focal point of a widening legal and governance battle.
PIMCO, once both a major creditor and roughly 40% equity holder after converting debt into shares during Oi’s earlier judicial reorganization, played an influential role in shaping the company’s direction. Critics allege that influence went further than ordinary creditor oversight. Court filings show that PIMCO-backed governance led to the appointment of a new board and executive management team while the firm remained a significant bondholder, creating what opponents describe as a conflict between creditor recovery and corporate stability.
Those tensions are now erupting around Oi’s most valuable remaining asset: its 27.2% minority stake in V.tal, the digital infrastructure platform spun out of Oi in 2021. V.tal owns the largest independent fiber network in Brazil and represents the crown jewel in Oi’s estate. A court-appointed manager has scheduled a March 5 auction for the stake, setting a minimum price of approximately $2.4 billion and requiring cash-only bids to ensure a transparent, competitive process.
A creditor group led by PIMCO, acting through trustee UMB Bank, has challenged those terms. The group argues that noteholders should be allowed to acquire the asset by canceling debt rather than paying cash. Oi counters that such a structure would effectively sidestep the auction’s intent, enabling creditors to secure the asset at a discount and potentially deterring other bidders.
Complicating matters further, all of the notes that would be used in any debt-for-equity exchange have already been seized by Brazilian labor courts. Those courts have held PIMCO and affiliated creditors liable for significant employee-related obligations, and last week a Brazilian judge issued a preliminary injunction ordering the seizure of certain PIMCO-linked notes. Oi is also suing PIMCO, SC Lowy and Ashmore, alleging abuse of control and seeking to curtail the creditors’ rights tied to their holdings.
The lawsuit introduces additional claims, including that executives installed during the creditor-influenced period were compensated under packages tied in part to bond repayment metrics. Oi further alleges that internal communications show creditor representatives directing strategic decisions at the company. In September 2025, a Brazilian court removed the PIMCO-supported board and executive team, citing unreliable financial disclosures and failures to comply with the court-approved restructuring plan.
Supporters of PIMCO argue that large creditors inevitably wield influence in complex restructurings and that debt exchanges are common tools for resolving distressed situations. But the optics have shifted. What may have been tolerated by the Temer and Bolsonaro years as necessary creditor activism is now being examined through a different political lens, one more skeptical of concentrated financial power and more responsive to labor claims and public-service risks.
That change in climate matters. Oi is not just another distressed issuer. It operates critical telecommunications infrastructure in Brazil, and past filings allege that under prior governance essential services faced disruption while financial disputes escalated. With Lula’s administration less inclined toward laissez-faire restructuring outcomes, courts appear more willing to scrutinize creditor conduct and the broader consequences of financial engineering.
As the March auction approaches, the stakes extend beyond a single asset sale. The battle over V.tal encapsulates a larger question: how far can a creditor go in shaping — or effectively controlling — a distressed company before that influence becomes abuse? For PIMCO, a firm that entered Brazil during a market-friendly reform era, the answer may now be determined in a political and judicial environment far less sympathetic to aggressive creditor tactics.
A PIMCO spokesperson told CorpGov “Any allegations that PIMCO, or its funds, either acted as a controlling shareholder of Oi or bear liability for Oi’s obligations are entirely unfounded. Oi’s history of financial difficulties is well-documented as the company has been undergoing judicial reorganization proceedings for more than 10 years. To attempt to hold PIMCO and its funds responsible for the company’s liabilities is erroneous and unjust, and we are confident the rule of law will prevail.”
Whether the V.tal stake is sold for cash to an outside bidder or becomes the subject of further litigation, the outcome will likely mark a defining chapter in one of Latin America’s most complex restructurings — and a cautionary tale about how quickly the political winds can turn against financial power.
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The post From Market Savior to Power Struggle: PIMCO’s Bet on Brazil’s Oi Enters a New Political Era appeared first on CorpGov.
