Reliance Communications will shortly move the insolvency tribunal seeking bankruptcy protection as the Anil Ambani-owned company seeks to sell assets, repay lenders and pare its <Rupee>42,000-crore debt within 270 days, having been unable to do so in the past year and a half.
“The board noted that, despite the passage of over 18 months, lenders have received zero proceeds from the proposed asset-monetisation plans, and the overall debt-resolution process is yet to make any headway,” the company said in a statement on Friday.
It added that RCom has been unable to complete its <Rupee>18,000 crore asset-sale plan due to various legal hurdles and the lack of consensus among more than 40 lenders, Indian and foreign, despite more than 45 meetings. The lenders’ consortium includes State Bank of India and China Development Bank. Others include Union Bank, Canara Bank, IDBI Bank, Standard Chartered Bank and HSBC.
RCom and its two units — Reliance Telecom Ltd (RTL) and Reliance Infratel Ltd — will soon take steps to seek fast-track resolution through the National Company Law Tribunal (NCLT), Mumbai, the company said.
“The board believes this course of action will be in the best interests of all stakeholders, ensuring comprehensive debt resolution in a final, transparent and time-bound manner within the prescribed 270 days,” the company said.
RCom’s move will mean its agreements to sell 122.4 MHz of spectrum and 43,000 telecom towers to Reliance Jio and some real estate to Canada’s Brookfield get cancelled. However, it has already completed the sale of nodes and fibre for Rs5,000 crore.
Under the NCLT process, interim resolution professionals (IRPs) will be nominated by the tribunal to run the company and its units and oversee a bidding process to sell the remaining assets within a maximum 270 days.
Jio could then bid for those same assets, with a person familiar with the matter saying the Mukesh Ambani-owned telco may “end up paying less for the same assets under the insolvency process”. Jio didn’t immediately respond to ET’s queries.
RCom shares ended at Rs11.60 on the BSE on Friday, down 1.3%.
In May 2018, the NCLT had admitted three insolvency petitions against RCom filed by Swedish gear maker Ericsson, which was seeking a payment of over Rs1,100 crore in dues. The insolvency tribunal named three separate IRPs from RBSA Restructuring Advisors LLP to run RCom and its two units, RTL and Reliance Infratel, as part of the bankruptcy proceedings.
But the telco — which was forced to shut its wireless operations under financial pressure late 2017 — moved the National Company Law Appellate Tribunal (NCLAT) and averted bankruptcy proceedings by citing its deals with Jio and Brookfield, and agreed to pay Ericsson Rs550 crore as a settlement.
But RCom has still not paid Ericsson, triggering contempt of court petitions in the Supreme Court against the telco’s chairman Anil Ambani, with the spectrum sale to Jio having been rejected by the Department of Telecommunications (DoT). The government said the deal to trade airwaves does not conform to its guidelines after Jio wrote to DoT refusing to be held liable for any of RCom’s past dues.
“Jio’s letter to DoT was practically the last nail in the coffin… This (moving NCLT) will at least ensure a debt resolution within a specific time frame and some sort of certainty for lenders,” said a person familiar with the matter.
The apex court had backed DoT’s contention and had asked RCom and Jio to decide on the matter. But Jio has stuck to its stance, following which DoT has also repeatedly refused to clear the deal, leading to a stalemate.
Besides Ericsson, RCom also needs to pay Rs232 crore to the minority shareholders of Reliance Infratel, including HSBC Daisy Investments. This matter is being separately pursued in the NCLAT.
Jio and RCom recently extended the tenure of their trading pact by another six months to June end, but with Friday’s statement, that deal would appear to be off the table.
Source: Economic Times, February 2,2019