Anil Ambani’s Reliance communication Ltd (RCom) has a debt of Rs 47,332 crore, and, its lenders have called for a meeting today to discuss restructuring proposals for the debt-ridden telecom firm. According a report by the The Mint on Thursday, ratings agency Fitch said “some kind of default is a real possibility”, while cutting RCom’s debt rating to junk status.
The restructuring proposals could look at all available recast tools like corporate debt restructuring (CDR), strategic debt restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A), said one banker on condition of anonymity. The banks can convert the part of their debt in a stressed company to 51% equity under SDR. This allows the bank to take operational control of the company, allowing them to sell the company if a suitable buyer is available. Under S4A, banks can break up the debt into sustainable and unsustainable halves, allowing deep restructuring in the latter, while the former continues to be serviced.
“Lenders are currently looking to give more time to the company under one of these restructuring schemes,” said the first person cited earlier to The Mint. Earlier this week the investors in a meeting has thought of refinancing for some of its debt even as it was looking for approval from its bankers to sell the telecom tower and also thinking of merging the wireless business with Aircel Ltd.
It is estimated that it will get Rs 11,000 crore from the sale of tower. The union with Aircel would transfer Rs14,000 crore debt to the merged company. According to The Mint RCom said it expected the deal to be completed by September. “Lenders are awaiting the final Supreme Court verdict in the matter of Aircel before we give the nod for the deals,” the banker added. Earlier this year, the Supreme Court had threatened to revoke Aircel’s licence if its Malaysian owner T. Ananda Krishnan did not appear in court in a case of corruption against him. The court had restrained the transfer of Aircel’s 2G licence to any other telecom company.
RCom’s problems sky rocketed when rating agencies downgraded them because of its debts. Care Ratings and Icra Ltd downgraded the telecom operator’s short- and long-term debt to default. RCom reported its first fiscal year loss on Saturday as new entrant Reliance Jio Infocomm Ltd, hurt the entire telecom industry.
