OAS S.A. Announces Information Regarding Continuing Restructuring Settlement Negotiations With Certain Holders Of OAS Investments GmbH's 8.25% Senior Notes Due 2019, OAS Finance Limited's 8.00% Senior Notes Due 2021 And OAS Finance Limited's 8.875% Perpetual Notes

SAO PAULO, July 9, 2015 /PRNewswire/ -- OAS S.A. (together with certain of its affiliates, the "Company") previously announced on June 19, 2015 that it had engaged in negotiations with certain holders of, or managers of entities holding beneficial interests in, the above-captioned notes (the "Notes," and such holders of the Notes, together with the managers of entities holding beneficial interests in the Notes, the "Noteholders") of which approximately US$1.775 billion in principal amount plus accrued interest is outstanding.  The Company announced today that it has continued to engage in discussions with the Noteholders.

On June 25, 2015, the Company executed confidentiality agreements (the "Confidentiality Agreements") with the Noteholders to facilitate discussions concerning the Company's capital structure and potential alternatives for a proposed restructuring of the Company.  Pursuant to the Confidentiality Agreements, the Company agreed to disclose publicly after the expiration of a period set forth in the Confidentiality Agreements certain information regarding the discussions and/or negotiations that have taken place between the Company and the Noteholders concerning a restructuring of the Company, as well as all material and certain other confidential information concerning the Company that the Company has provided to the Noteholders (the "Confidential Information").  The information included in this press release and certain information posted on the Company's website referenced herein is being furnished to satisfy the Company's public disclosure obligations of all material and certain other Confidential Information under the Confidentiality Agreements.  The Confidentiality Agreements have terminated in accordance with their terms, except as otherwise provided in the Confidentiality Agreements.

Continuing Discussions with Noteholders

On June 25 and 26, 2015, representatives of the Company and the Company's financial and legal advisors (the "Company Representatives") met in New York with representatives of the Noteholders and the Noteholders' financial and legal advisors (the "Noteholder Representatives") to discuss possible terms for a potential financial restructuring of the Company (a "Transaction").  In addition, the Company Representatives have participated in follow up telephonic conferences from Brazil with certain Noteholder Representatives during the weeks of June 29 and July 6, 2015.

As of the date hereof, no agreement concerning the terms of a Transaction has been reached.  While negotiations between the Noteholders and the Company may continue in the future, there can be no assurance that negotiations will continue or if they do continue that they will result in an agreement regarding the terms of a Transaction. 

Confidential Information

At the meetings in New York on June 25 and 26, 2015, as well as in the aforementioned calls, the Company Representatives and Noteholder Representatives discussed a number of topics relating to a Transaction.  Among other things, during these discussions, the Company Representatives disclosed that:

• the Company would be willing to consider, as part of a Transaction and subject to the Company's liquidity needs, new debt instruments with an implied refinancing risk, and, with respect to new senior debt, maturities of no less than 7 years, subject to certain limitations, in response to the Noteholder Representatives' concern that the maturities previously proposed by the Company were unacceptable;
• the Company would be willing to consider, as part of a Transaction, providing creditors with convertible instruments that would permit them to convert debt received as part of a Transaction into equity (under conversion terms to be defined) upon a liquidity event controlled by the Company;
• the Company prefers a Transaction in its operating currency (Brazilian reais) given the hedging costs and material currency risks of U.S. Dollar denominated debt;
• the Company is essentially indifferent to the structure of the Transaction and would consider all creditor suggestions, provided that such Transaction is consistent with law and provides equitable treatment within classes and subordinations;
• the Company Representatives discussed with the Noteholder Representatives the Company's shareholder's desire to repay the approximately R$ 100 million loan it owes to the Company from future distributions that it may receive from the Company. The shareholder is currently ahead of payments for the loan, with the next amortization payment due in 2017;
• included in the Company's projections for cash flow available for debt service contained in the presentation dated June 9, 2015 outlining certain potential written restructuring scenarios, which was previously made public on June 19, 2015, the Company had estimated non-recurring expenses by year are approximately as follows:

• consistent with and in addition to the Company's previous disclosures made in its Brazilian restructuring proceedings regarding actual collections of booked accounts receivables against what they had previously projected, the Company's recorded average slippage for 2015 to date was approximately -20% and the slippage was for the following months in 2015 as follows:

• the Company would like to negotiate an agreement with the creditors of SPE Gestão e Exploração de Arenas pursuant to which those creditors would have their claims satisfied by OAS Arenas and the cash flows received from its arenas and obtain a release of the guaranty issued by OAS Investimentos S.A.; and
• the amount currently outstanding on the 4^th Debenture is approximately R$260 million.

During the week of June 29, 2015, certain of the Company Representatives engaged in telephone conversations with certain of the Noteholder Representatives, during which the parties discussed certain non-confidential information related to the term sheet provided by the Noteholders on June 10, 2015. 

Further, on July 3, 2015, the Noteholder Representatives provided to the Company Representatives a second written restructuring term sheet representing the terms of a potential Transaction (the "Second Noteholder Term Sheet").  The Second Noteholder Term Sheet represents the second term sheet delivered to date by the Noteholders to the Company concerning the terms of a Transaction.  As of the date hereof, the Company has not responded to the Second Noteholder Term Sheet or made a counterproposal.

On July 7, 2015, the Company Representatives and the Noteholder Representatives had a telephone call during which the Company Representatives asked the Noteholders Representatives questions and clarifications regarding the Second Noteholder Term Sheet.

In addition to the disclaimers and qualifiers set forth in the materials themselves, all statements made in the Second Noteholder Term Sheet are in the nature of settlement discussions and compromise, are not intended to be and do not constitute representations of any fact or admissions of any liability, and are for the purpose of attempting to reach a consensual compromise and settlement.  Nothing contained in the Second Noteholder Term Sheet is intended to or shall be construed to be an admission or a waiver of any rights, remedies, claims, or causes of action or defenses. The information contained in the Second Noteholder Term Sheet is for discussion purposes only and shall not constitute a commitment to vote for or consummate any transaction described therein.  The Noteholders have informed the Company that none of the Noteholders is a temporary insider or fiduciary of the Company or any of its subsidiaries or affiliates or any creditor or equity owner of the Company or any of its subsidiaries or affiliates, and each of the Noteholders expressly disclaims any purported fiduciary duty to any such parties.

The Company has published the Second Noteholder Term Sheet on its investor relations website, in English and in Portuguese. It will also be published, in English and in Portuguese, on its public website tomorrow, July 10, 2015, available at http://www.oas.com.br/oas-com-1/home.htm. It is included below in English as well.

Second Noteholder Term Sheet

Preliminary Internal Working Draft of July 3, 2015

CONFIDENTIAL, FOR DISCUSSION PURPOSES ONLY
SUBJECT TO RULE 408 OF THE FEDERAL RULES OF EVIDENCE

THIS NON-BINDING TERM SHEET IS AN OUTLINE OF THE POSSIBLE BASIS ON WHICH THE AD HOC GROUP OF NOTE HOLDERS AND ALDEN AND AURELIUS MAY CONSENT TO A REORGANIZATION PLAN FOR OAS S.A. AND CERTAIN OF ITS AFFILIATES.  IT IS FOR DISCUSSION PURPOSES ONLY, AND DOES NOT CONSTITUTE AN OFFER, AGREEMENT OR COMMITMENT.  IT IS NOT EXHAUSTIVE AS TO ALL TERMS AND CONDITIONS WHICH WOULD BE REQUIRED.  THE ACTUAL TERMS AND CONDITIONS UPON WHICH THE SUPPORT MIGHT BE PROVIDED ARE SUBJECT TO SATISFACTORY COMPLETION OF DUE DILIGENCE, INDIVIDUAL NOTE HOLDER INTERNAL CREDIT APPROVALS, SATISFACTORY DOCUMENTATION AND SUCH OTHER TERMS AND CONDITIONS AS ARE DETERMINED BY THE AD HOC GROUP AND ALDEN AND AURELIUS.

OAS S.A. "Em Recuperção Judicial" ("OAS")
and certain of its Affiliates in Brazilian judicial
reorganization proceedings before the
RJ Court (together, the "OAS RJ Group")

Summary of Terms and Conditions

July 3, 2015

Basic Concepts, Plan Provisions, and DIP provisions: Company-by-company treatment of creditors' claims, as set forth herein. Plan treats "drop-down" of Invepar from Investimentos to Infaestrutura as if it never happened, and related intercompany claims remain at Investimentos level.

Investimentos creditors to receive, as detailed below, (a) cash payment from Investimentos asset sales and (b) 1st Lien OAS Notes, (c) OAS take back notes, and (d) creditor trust certificates.  Investimentos creditors' share of the 1st Lien OAS Notes to include R$ 70 million additional 1st Lien OAS Notes on account of subrogation claim arising on repayment of the 4th series debentures and settlement of various other intercompany claims.

OAS/COAS creditors to receive, as detailed below, (v) OAS take back notes, (w) the right to participate in the postpetition financing in exchange for 1st Lien OAS Notes, (x) OAS warrants, (y) right to creditors' share of excess cash flow after the 1st Lien OAS Notes have been paid in full, and (z) creditor trust certificates.

OAS/COAS to raise postpetition financing in an aggregate amount of up to R$ 550 million, sourced solely from (i) repayment of the R$ 100 million shareholder loan and (ii) up to R$ 450 million of new postpetition financing.

All OAS/COAS creditors to be offered opportunity to participate in the OAS/COAS R$ 450 million postpetition financing, but the full amount to be back-stopped by Investimentos creditors via (x) a R$ 300 million advance under DIP/exit financing and (y) up to R$150 million advanced from 75% of the net proceeds of Investimentos assets slated for sale other than Invepar. 

Participating creditors and Investimentos creditors (collectively, "Participating Creditors") to receive pro rata share of a 20% of funded amount commitment/disbursement fee for the postpetition financing.  Investimentos creditors to receive a 20% of face commitment in backstop fees.  All fees payable to creditors in 1st Lien Notes.

DIP/exit financing to be provided to Infraestrutura, and on-lent on terms and conditions set forth herein. 

Post-reorganization corporate structure to consider and effectively address applicable income tax rules.

Plan to minimize claims pool at each OAS RJ Group member, including relevant transactions supported in advance by USD note holders, including agreed treatment of creditors of SPE Gestão.

[Critical vendors treatment:  TBD]

Debt Instruments: Note – Year 1 = 2016

All Participating Creditors:¹

1st Lien OAS Note:

• Denominated in USD, governed by NY law, DTC-cleared
• Secured by all OAS assets, including COAS shares and by DIP proceeds and other Investimemtos assets
• COAS corporate guarantee (first priority)
• Face amount: up to R$ 700 million – equivalent to USD 223 million based on an FX of 3.14 (based on a curve)
• Interest rate: 16% – 15.5% PIKed from Year 1 to Year 5
• Maturity: Year 7
• Amortizations: None, but subject to first priority cash sweep (85% of excess cash, TBD; remaining 15% available for OAS, of which 7.5% to be accumulated and available for distribution to shareholders once 1st Lien OAS Notes has been paid in full; all dividends to be stopped until such payment in full)

All OAS/COAS Creditors:

All OAS/COAS creditors will have the right to elect either Senior OAS "Take Back Paper" Tranche B or Tranche A, subject to a pro-rata allocation if there is an oversubscription, mechanics to be discussed.

Senior OAS "Take Back Paper" Tranche B:

• Denominated in USD, governed by NY law, DTC-cleared
• COAS corporate guarantee (second priority)
• Security: TBD
• Face amount: R$ 725 million – equivalent to USD 231 million based on an FX of 3.14 (based on a curve)
• Interest rate: 4% – 3.75% PIKed from Year 1 to Year 5 (cash payment of 0.25% for those years)
• Maturity: Year 19
• Amortization: 5% p.a. in years 8-11, and 10% p.a. in years 12-19

Senior OAS "Take Back Paper" Tranche A:

• Denominated in R$
• COAS corporate guarantee (second priority)
• Security: TBD
• Face amount: R$ 3,327 million
• Interest rate: 0.5% – 0.25% PIKed from Year 1 to Year 5 (cash payment of 0.25% for those years)
• Maturity: Year 25
• Amortization: bullet

Recoveries of Take Back Paper Tranches A and B have similar NPV.

Debt instruments to include reasonable and customary terms, including reporting, covenants, events of default, etc., including prohibition on incurrence of any other secured debt until 1st Lien OAS Notes are repaid in full.

DIP/exit Financing: To be on the terms and conditions set forth on Annex A.

Cash Distribution to Investimentos Creditors; Alternative to Immediate Sale: Investimentos/Infraestrutura to sell assets and distribute proceeds (and any cash on hand) to Investimentos creditors only, after netting direct fees/expenses of sale, agreed restructuring costs, advancement of the R$ 300 million in DIP/exit financing, advancement of the up to R$ 150 million from 75% of the proceeds of non-Invepar assets slated for sale, and repayment of the 4th series debentures.

Execution of plan support agreement to coincide with signing of Brookfield's SPA, which indicates a minimum price of R$2.2 billion, satisfactorily resolved R$1.2 billion Invepar receivables, and sale process as provided herein, and otherwise acceptable to offshore creditors.

In the absence of any of the foregoing, Brookfield arrangements to be terminated, and Investimentos to retain Invepar and to pursue Invepar disposal through a competitive process which would include Brookfield during the tenor of the DIP/exit financing.

Invepar sale process to be acceptable to USD note holders, including fair/transparent auction procedures, with a 90-day "go shop" period and a 3% over-bid, acceptable break-up fee, but excluding any last look right for Brookfield or any other investor.

The reorganization plan to require a minimum cash distribution payable to Investimentos creditors of R$1,620 million upon confirmation of the plan (which is the expected gross proceeds of Invepar sale, net of items set forth above).

Creditor Trusts: A vehicle (investment fund or other acceptable structure) to be established for the benefit of all OAS RJ Group creditors proportionately; creditor-acceptable governance to be discussed. Assets to be contributed to the trust include:

• Receivable against Invepar concessions (subject to above)
• Shareholder loan (to the extent not advanced to OAS as part of the postpetition financing)
• Causes of action

A second vehicle (investment fund) to be established for the benefit of all Investmentos creditors; creditors to receive trust interests proportionate to their Investimentos claims; creditor-driven governance to be discussed.  Assets to be contributed to the trust include all direct and indirect Investimentos assets other than Invepar.  75% of net proceeds of the assets in the second vehicle (up to a cap of R$ 150 million from asset slated for sale) to be advanced to OAS as postpetition financing.

Assets in vehicles to be managed/disposed for maximum creditor value, and net proceeds (other than (a) up to R$ 150 million advanced to OAS from assets other than Invepar and (b) the proceeds of the shareholder loan that are advanced as part of the postpetition financing) to be distributed to creditors in respect of their participations in the vehicle and without deducting against any of the debt instruments.

Warrants: Existing shareholders and management to exit the restructuring with 100% of OAS's equity, and to retain management discretion and authority.

The OAS/COAS creditors will have warrants issued with conversion ratios, traditional anti-dilution protections, term of warrants and liquidity events/rights to be discussed. Conversion to occur upon liquidity events to be discussed, but implementation of liquidity events to be in sole discretion of OAS.

Excess Cash: Excess Cash will be defined as the ending cash each December 31st in excess of a minimum amount to be defined, which will grow consistent with the growth of the reorganized OAS/COAS

The entitlement to the Excess Cash will be as follows:

The amounts available to pay dividends cannot be paid out until the 1st Lien Note has been repaid in full.

Application of the creditors' share of Excess Cash will be: (1) first, to the 1st Lien OAS Note and (2) thereafter, to be paid to OAS/COAS creditors.  Excess cash mechanism subject to review and approval by advisors to offshore creditors.

Governance: Creditor-approval (non-objection) of plan monitor to be installed upon plan confirmation, with information and CFO access rights, and with independent creditor reporting rights/responsibilities, at the company's expense.

Board to be comprised of five members, with at least two independent members; independent board members to be selected and appointed by shareholders based on a panel of five or more candidates approved/not objected to by creditors.

Conditions Precedent to Plan Effectiveness / Miscellaneous: The aggregate [filed] claims pool to be fixed at an amount that is no greater than R$[_____]. Claims determination process that includes creditor representation.

Execution of a definitive/binding Invepar SPA, which indicates a minimum price of R$2.2 billion by [1 September 2015].

The aggregate of all fines and penalties assessed by Brazilian authorities against OAS and its affiliates shall not exceed R$ [_____].

Upon the effectiveness of the plan and the closing of all transactions contemplated by the plan on the terms and conditions contained herein, all pending litigation commenced by Alden and its affiliates ("Alden"), Aurelius and its affiliates ("Aurelius"), or Ad Hoc Group members (the "Noteholders") against any member of the OAS RJ Group, including in Brazil, the US, and elsewhere (the "Pending Litigation"), will be dismissed pursuant to documentation in form and substance acceptable to OAS, Alden, Aurelius, and the Noteholders, as applicable. The plan support agreement shall include an agreed stay of all Pending Litigation.

The parties to pursue a cross-border insolvency protocol to resolve all relevant insolvency proceedings, including the chapter 15 and BVI proceedings, and a chapter 15 order recognizing and enforcing the reorganization plan within the US.

Upon confirmation, the OAS RJ Group to pay the fees/expenses of indenture trustees and creditors' advisors in connection with this restructuring, including those associated with the BVI proceedings (including the JPLs fees/expenses) and litigation in Brazil and elsewhere.

All terms and conditions are mutually dependent.

All terms and conditions are subject to documentation satisfactory to USD note holders, including a plan support agreement and an agreed reorganization plan, with attachments and related court filings.

Annex A

THIS NON-BINDING TERM SHEET IS AN OUTLINE OF THE POSSIBLE BASIS ON WHICH THE AD HOC GROUP OF NOTE HOLDERS MAY CONSENT TO THE PROVISION OF DIP FINANCING TO OAS INFRAESTRUTURA S.A. AND CERTAIN OF ITS AFFILIATES.  IT IS FOR DISCUSSION PURPOSES ONLY, AND DOES NOT CONSTITUTE AN OFFER, AGREEMENT OR COMMITMENT.  IT IS NOT EXHAUSTIVE AS TO ALL TERMS AND CONDITIONS WHICH WOULD BE REQUIRED.  THE ACTUAL TERMS AND CONDITIONS UPON WHICH CONSENT MIGHT BE PROVIDED ARE SUBJECT TO SATISFACTORY COMPLETION OF DUE DILIGENCE, INDIVIDUAL NOTE HOLDER INTERNAL CREDIT APPROVALS, SATISFACTORY DOCUMENTATION AND SUCH OTHER TERMS AND CONDITIONS AS ARE DETERMINED BY THE AD HOC GROUP.  TERMS USED BUT NOT DEFINED HEREIN HAVE THE MEANING ASCRIBED TO SUCH TERMS IN THE MAY 14, 2015 COMMITMENT LETTER FROM BROOKFIELD INFRASTRUCTURE GROUP BERMUDA LIMITED.

OAS Infraestrutura S.A. "Em Recuperção Judicial (the "Borrower)
and certain of its Affiliates in Brazilian judicial
reorganization proceedings before the
RJ Court (together, the "OAS RJ Group")

Summary of Terms and Conditions
Consent to Proposed DIP/Exit financing

July 3, 2015

Maximum Issuance: At no time will the Borrower or any member of the OAS RJ Group issue more than R$300 million in face amount of the Debentures under the Indenture in the aggregate.^2 3

Intercompany Advances: The Borrower shall immediately advance all net proceeds of the issuance of the Debentures under the Indenture, as and when received, to OAS Investimentos S.A. ("OASI") in the form of a dividend on equity interests.  Each onward transfer of such proceeds shall be made only to OAS S.A. ("OAS") or Construtora OAS S.A. ("COAS") and under the terms of the term loan described below, and shall be in the form of a loan with priority under Article 67 of Brazilian Law No. 11.101/05.

Use of Proceeds: OASI will provide a term loan (the "Term Loan") to OAS and COAS, the proceeds of which are to be used to fund OAS's and COAS's weekly rolling 13-week operating cash flow forecasts, each of which shall have been approved in advance by the financial advisor to the Ad Hoc Group of Note Holders (the "Ad Hoc Group").  The terms of the Term Loan (repayment, maturity, acceleration, etc.) will match the terms of the Debenture. 

Permitted Investments: Other than funds advanced to OAS or COAS in compliance with the Term Loan, all funds advanced by the Borrower to OASI upon issuance of the Debentures under the Indenture, and all funds repaid by OAS or COAS to OASI in compliance with the Term Loan, shall be maintained by OASI at all times only in [describe permitted investments, such as a demand deposit account with a rated bank] (the "DIP Reserve Account").

Public Reporting: The OAS RJ Group will publish on their investor relations website a weekly report, including details, as of the end of the previous week (and all previous weeks), of (a) the outstanding balance of the Term Loan, (b) the amount on deposit in the DIP Reserve Account, (c) the amount of each Term Loan advance and repayment since inception, and (d) the following week's rolling 13-week forecast.

Standstill/Covenants: The OAS RJ Group members shall agree, during the time the DIP financing remains available, to the following negative covenants:  (a) a prohibition on the incurrence of any debt other than the Debentures, except as may be required in the ordinary course of operations and consistent with past practice, (b) a prohibition on any corporate merger or consolidation, (c) a prohibition on intercompany transactions of any sort, except as may be required in the ordinary course of operations and consistent with past practice, and (d) a prohibition on the encumbrance, sale, or leaseback of any asset, except as may be required in the ordinary course of operations and consistent with past practice.

Carve Out: Consistent with applicable law, US$[_____] of the proceeds of the issuance of the Debentures under the Indenture shall be deposited by the Underwriter directly into a [USD account at the New York bank of one of the Ad Hoc Group's advisors and Alden/Aurelius's advisors] as a fee reserve for the satisfaction of creditors' advisors fees/expenses, to be used for work related to the restructuring and related litigation.

Documents/Amendment: These terms and conditions to be documented as part of a plan support agreement (or similar agreement) to the satisfaction of OAS, the Ad Hoc Group, and Alden/Aurelius, and none of these terms and conditions may be amended without the consent of OAS, the Ad Hoc Group, and Alden/Aurelius.

Contact:
OAS - Comunicacao+
+ 55 11 3874-2020

¹ All Participating creditors share in up to R$ 540 million of the 1st Lien OAS Notes; R$160 million on account of certain intercompany setoff s and backstop fee are for Investimentos creditors only.

² See Term Sheet section on "Cash Distribution to Investimentos Creditors; Alternative to Immediate Sale" for limits on repayment of the Debentures, including if Brookfield is not the winning bidder for Invepar by a date certain.

³ Staging of issuances/advances to be discussed.