RIO DE JANEIRO (Reuters) - In mid-November, the former chief executive of Brazilian telecoms company Oi SA OIBR4.SA told the debt-laden company's board that he was receiving ominous phone calls, according to two people present at the meeting.

A man talks on a payphone with the logo of Brazilian telecoms company Oi SA outside the company's office in Rio de Janeiro, Brazil December 22, 2017. REUTERS/Ricardo Moraes

The anonymous messages came to Marco Schroeder’s cellphone and his home phone. Often, the caller seemed to know his exact location, such as a Sao Paulo airport. At least once, according to a person close to the executive, the calls threatened severe physical harm.

Confidants of Schroeder believed the calls were coming from people associated with Societe Mondiale, a fund owned by distressed-debt tycoon Nelson Tanure that controlled the company’s board but had fallen out with its management over how to best maneuver the company out of bankruptcy protection.

A Societe Mondiale representative called any connection between Tanure and such calls “unreasonable and irresponsible.” Schroeder declined to comment. Societe Mondiale has declined multiple requests to make Tanure available for interviews regarding Oi.

In any case, the fact such suspicions arose in the final months of Oi’s recently completed debt restructuring shows just how bitterly the process divided Brazil’s largest fixed-line carrier, which employs over 100,000 people. This account of the backdrop to the restructuring was pieced together based on interviews with over a dozen bondholders, lawyers and executives.

On Wednesday, Oi’s creditors finally approved a plan to restructure Oi’s 65 billion reais ($20 billion) of debt, putting an end to Latin America’s largest ever in-court reorganization. Oi’s management has said the company is now effectively for sale with a number of potential buyers circling the telecom provider.

Yet Oi's two largest original shareholders, Societe Mondiale and Pharol SGPS SA PHRA.LS, formerly Portugal Telecom, have filed or threatened to file motions to overturn the decision. Oi, in response, has said the plan is legally airtight.

ROCKY FROM THE BEGINNING

As a “national champion” in the parlance of Brazilian business, or a company expected to promote national interests as well as make a profit, Oi had been required by the government to expand into far-flung regions in recent decades and provide services, such as 650,000 little-used payphones, that offered meager returns.

By the time the company collapsed under its massive debt load and filed for bankruptcy in June 2016, a global who’s who of distressed-debt investors had bought in and frictions between shareholders and bondholders were coming into sharp relief.

Among the latter were veterans of sovereign debt fights Aurelius Capital Management and Goldentree Asset Management.

Among the former was Tanure’s Societe Mondiale, which had scooped up a chunk of the company’s shares and struck alliances giving him majority control of Oi’s board.

That put the board on a collision course with major bondholders, who were pushing to severely dilute the value of equity stakes. Throughout 2017, Tanure’s son, Nelson Jr., attempted to recruit New York and London hedge funds to support a shareholder-friendly plan, according to people with knowledge of the matter.

That campaign was initially backed by Oi’s management. But as the fourth quarter approached and Oi entered its second year in bankruptcy protection, the company’s executives began to doubt the plan could win over enough creditors.

In mid-October, the Schroeder-led management team shifted its negotiating focus to the company’s major bondholder groups, including Aurelius and Goldentree, without the board’s blessing, according to the people.

“The management from the beginning negotiated with all the creditors, shareholders, and the government,” Schroeder told Reuters.

BOARD VS MANAGEMENT

That move incensed the board, the people said, and in early November, it appointed two new executives in a bid to gain more influence over the management.

Later in November, Schroeder reported receiving the anonymous phone messages, according to the people.

Soon after, he abruptly resigned, citing disagreements with the board, and the management quickly chose current CEO Eurico Teles, a lawyer, to replace him. Not wanting to add a tussle over management to the bondholder fight, the board accepted his nomination, one person said.

But tensions continued to simmer.

As a court-imposed December deadline for a final restructuring plan approached, Tanure-backed board member Demian Fiocca dashed off an email to Oi Chief Financial Officer Carlos Brandao, accusing him and other managers of undermining a shareholder friendly proposal.

“Are you taking power away from the board and the company? Is that what you’re doing?” asked Fiocca in the email, seen by Reuters. “If that’s true, it’s absurd.”

Oi declined to comment on the episode. A representative for Fiocca said he had exchanged hundreds of emails with Brandao, with only one adopting a “harder” tone.

THE ENDGAME

In the end, Fiocca’s protests were in vain.

Late that evening, on Nov. 29, the judge overseeing Oi’s restructuring gave Teles sole powers to negotiate a restructuring plan, sidelining the board, citing the slow pace of negotiations 17 months after the company filed for bankruptcy protection.

As the deadline for a deal approached, at a late night teleconference in mid-December, Teles reached an understanding in principal on a plan handing its major bondholders, including Aurelius and Goldentree, up to 75 percent of the company’s stock.

The board was livid at the equity dilution, which was three times what they had proposed, as well as terms they viewed as giving Teles too much say over the board’s composition, according to two sources.

Toward the end of a board meeting later that week, Luis Palha, the chairman of shareholder Pharol, asked advisors to leave the room and told Teles he felt severely betrayed, the sources said.

Oi declined to comment on the episode. A Pharol spokesman did not comment on the incident, referring Reuters to a statement saying that it will analyze the restructuring plan and evaluate all legal options.

At the creditors meeting, which began this Tuesday and took place in the same venue that hosted boxing matches in the 2016 Olympics, all major bondholders voted for the plan.

In the hours before, Societe Mondiale unleashed a flurry of legal filings.

“Oi with this plan is another company,” an exhausted Eurico Teles told journalists after the 13-hour meeting ended just after 2 a.m. “I think this was an emotional day.”