RCom finalises ₹39,000cr debt reduction proposal
ON THE CARDS Spectrum sale, equity injection planned MUMBAI:
Reliance Communications Ltd (RCom) has finalised a resolution plan which involves the company selling assets and does not entail lenders and bond holders to write off their dues or convert it into equity. The company has also exited the strategic debt restructuring process.
According to the resolution plan, which includes sale of spectrums, fibre and tower network, an equity injection and development of real estate assets, the company’s debt will be reduced by ₹39,000 crore from the ₹45,000 crore as at the end of October.
The asset monetisation will reduce debt by ₹25,000 crore through prepayment and transfer of spectrum instalments. The entire proceeds will be used for prepayment to lenders, said chairman Anil Ambani.
“Lenders have received the final binding bids and all transactions are expected to be closed in a phased manner between January and March 2018,” the company said in an exchange filing.
The process and bids were vetted by an evaluation committee appointed by the Joint Lenders’ Forum. The panel was chaired by S.S. Mundra, former deputy governor of the Reserve Bank of India.
The company did not disclose the names of the bidders.
In June, lenders had invoked SDR provisions after the company presented a restructuring plan that involved hiving off and merging its wireless business with Aircel Ltd and selling a majority stake in its tower unit to Brookfield Infrastructure. Under the plan, lenders gave the company a breather on its interest payments until December 2018.
However, the merger with Aircel fell through, and on 20 October, the company presented a fresh debt repayment plan to its creditors, which envisaged raising ₹27,000 crore through sales of assets including spectrum, real estate and towers and further reduction of ₹7,000 crore after lenders convert this into equity for a 51% stake.
According to the SDR norms, lenders had to convert debt into equity by 28 December, said bankers.
Ambani said that the new resolution plan also includes development of Dhirubhai Ambani Knowledge City comprising 125 acres of real estate. This will lead to reduction of RCom’s debt by Rs10,000 crore.
The real estate at DAKC is held by a special purpose vehicle, which will have long-term debt financing on a non-recourse basis, the firm said in an exchange filing.
“There will be only recourse to real estate assets that are there in the SPV. It has no other recourse to RCom or anything else at all,” he said.
The resolution plan comes at a time when China Development Bank (CDB) has dragged the company to National Company Law Tribunal for insolvency proceedings. The company owes around $2 billion to Chinese lenders including CDB.
In a reply to a question on the pending insolvency petitions, Ambani claimed that RCom had received a go-ahead from all lenders, including overseas ones, for the resolution plan.
“Today, the fact of the matter is, we have had an understanding and an arrangement with all the lenders to ensure a substantial prepayment, the residual debt to be duly addressed and a viable business model for the new RCom with no risk to the banks of conversion, write offs etc,” he said.