Lenders are set to take control of Anil Ambani’s Reliance Communications Ltd. after the company’s debt-reduction plan failed.
The banks have decided to convert Rs 7,000 crore of loans into equity. The conversion will take place between December 7 and 15, Punit Garg, executive director at RCom, said in an interaction with BloombergQuint.
The lenders will get at least 51 percent of the stake in the operator after they invoked the Strategic Debt Reduction mechanism. That followed the default rating for its debt after the operator missed payments. It won a reprieve citing its plan to merge wireless business with Aircel Ltd. and sell a majority stake in its tower arm. The merger failed to get regulatory approvals.
RCom has been struggling to repay loans amid hyper-competition and skimming tariffs in the telecom industry. It has already decided to shut its 2G wireless business and merge its 4G services along with its enterprise unit.
The banks will look to sell the company to a strategic investor by December next year. There is a “standstill agreement” as far as repayment of principal and interest is concerned till then, said Garg. Once the sale is completed, the Reliance Group will become a public shareholder in RCom, he said.
The decision follows a meeting of the joint lenders’ forum led by State Bank of India on Monday.
The revised plan involves zero a write-down for the lenders, said Garg. “We will monetise assets to raise Rs 33,000 crore,” he said.
The company plans to raise close to Rs 17,000 crore from the spectrum, fibre and related businesses. It also plans to raise close to Rs 8,000 crore from sale of tower business and Rs 10,000 crore from real estate assets in Navi Mumbai and Delhi.
The monetisation mandate will be run by the management and the advisor will be appointed by the lenders, said Garg. The management will not enter any bilateral agreements with any bidder to maintain transparency and the final call will be taken by the lenders, he said.
RCom is the second telecom company to commit to zero write-downs after Tata Group, which sold its consumer telecom business to Bharti Airtel Ltd. on a debt-free basis.
RCom will also restart the tower sale process. Brookfield Infrastructure had earlier agreed to buy 51 percent in the tower unit for Rs 11,000 crore. The value may now come down to Rs 8,000 crore since RCom has discontinued its 2G wireless business, said Garg.