Am­bani’s Re­liance sees mount­ing debt troubles

New Straits Times - - Business World -

Bru­tal com­pe­ti­tion and 457 bil­lion ru­pees (RM29.97 bil­lion) of bor­row­ings have fi­nally caught up with bil­lion­aire Anil Am­bani’s Re­liance Com­mu­ni­ca­tions Ltd.

The In­dian wire­less op­er­a­tor rat­tled investors with its first full-year net loss amid signs it’s strug­gling to re­pay debt.

Its US$300 mil­lion (RM1.28 bil­lion) junk-rated note due in 2020 de­clined US$0.055 cents on the dol­lar to US$0.66 as of 12.23pm in Hong Kong, and the stock sank 4.4 per cent to ex­tend Mon­day’s 20 per cent slump.

Fitch Rat­ings and Lu­cror An­a­lyt­ics high­lighted a po­ten­tial liq­uid­ity crunch and peo­ple fa­mil­iar with the mat­ter said the com­pany sought more time to re­pay some loans.

The com­pany was in talks with its lenders to seek their ap­proval for the sale of its tower busi­ness and an equal merger of its wire­less busi­ness with ri­val Air­cel Ltd, that would al­low it to pare debt by 250 bil­lion ru­pees, said Gur­deep Singh, co-chief ex­ec­u­tive of­fi­cer of Re­liance Com­mu­ni­ca­tions on an in­vestor call on Mon­day.

The com­pany planned to re­fi­nance its debt in the in­terim pe­riod un­til Septem­ber 30 to fa­cil­i­tate the clos­ing of the trans­ac­tions, said Singh.

Re­liance Com­mu­ni­ca­tions had a full-year loss of 14 bil­lion ru­pees. Sub­scribers have dwin­dled in the past five years as larger ri­vals, such as Bharti Air­tel Ltd and Voda­fone Plc, slashed call rates and of­fered higher speed data. To re­pay debt, the com­pany is sell­ing its tow­ers to Cana­dian as­set man­ager Brook­field In­fras­truc­ture Group, as well as merg­ing the wire­less busi­ness with Air­cel Ltd.

Re­liance Com­mu­ni­ca­tions’ cash gen­er­a­tion and un­re­stricted cash of around US$200 mil­lion would be in­suf­fi­cient to pay its short-term debt of around US$600-$650 mil­lion, said Nitin Soni, Asia-Pa­cific cor­po­rate rat­ings direc­tor at Fitch Rat­ings.

How­ever, liq­uid­ity would still be de­pen­dent on its abil­ity to re­fi­nance ma­tur­ing debt, said Soni.

The junk-rated com­pany had 13.2 bil­lion ru­pees of cash and cash equiv­a­lents as of March 31, less than a quar­ter of its short­term bor­row­ings of 95 bil­lion ru­pees, it said in its earn­ings re­port on May 27.

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