REGIONAL COMMITTEES: LATIN AMERICA
WOM’ s Chapter 11 Bankruptcy Proceedings By Roberto Villaseca and Ricardo Reveco
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WOM S. A. is the second-largest mobile telecommunications provider in Chile, with approximately 8.5 million customers and holding around 25 % of the national market share. Founded in 2015 following the acquisition of Nextel Chile’ s assets by British private equity firm Novator Partners LLP, WOM quickly positioned itself as a disruptive force in the Chilean telecom sector, known for its aggressive pricing and bold marketing.
Before WOM’ s entry into the Chilean market, three incumbent companies( Movistar, Entel and Claro) had large market shares, and gaining market share was perceived as very difficult because customers would have to migrate from one of the incumbents to the new entrant. WOM’ s successful advertising campaigns led
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However, WOM ' s strategic investment initiative aimed at diversifying its service offerings and enhancing its market position resulted in substantial financial challenges, ultimately leading the company into financial distress by early 2024.
These solvency concerns took place in a difficult time for telecoms in the region, with Brazilian operator Oi S. A. filing for bankruptcy in 2023, WOM Colombia filing for bankruptcy protection in Colombia in early 2024, and Telefonica aiming to exit several markets and filing for insolvency proceedings in Peru in early 2025.
By February 2024, WOM had liabilities for US $ 1,053.6 million. Besides, on November 2024 WOM was supposed to pay the balance
of a US $ 450 million bond.
As a consequence, WOM and its affiliates filed for a Chapter 11 Bankruptcy Proceeding in Delaware, U. S. A. The initiation of the Chapter 11 proceeding was accompanied by a US $ 210 million debtor-in-possession( DIP) financing granted by JP Morgan, which was essential to support its restructuring efforts.
During the proceedings, WOM faced significant legal challenges, including( i) Chilean creditors willing to ignore the automatic stay,( ii) renegotiating executory contracts;( iii) a motion to dismiss filed in Delaware; and( iv) forcing some crucial shareholder’ s actions. Chilean creditors willing to ignore the automatic stay:
During the proceedings, one of WOM’ s main challenges was that a significant number of Chilean creditors-seemingly without U. S. connections- were willing to ignore the automatic stay imposed on all creditors worldwide, despite potential sanctions.
Given that local claims were considerably smaller than U. S. claims, and that they posed a risk to WOM ´ s operation, WOM requested authorization to privately negotiate with local creditors and pay them directly( notwithstanding Chapter 11’ s general prohibition against paying prepetition creditors during the case) to prevent them from pursuing legal action in Chile during the restructuring proceedings.
By securing court approval to pay local creditors, WOM avoided legal challenges in Chile and preserved operational continuity. This pragmatic approach was generally well-received.
As a result— and considering that Chilean recognition would not have prevented local creditors from initiating involuntary bankruptcy proceedings in Chile, which could have jeopardized the overall restructuring