China Development Bank, along with other Chinese lenders, which filed for insolvency against Rcom last month, is in advanced talks to take up 70% in development of Dhirubhai Ambani Knowledge City (DAKC) in Navi Mumbai. The lenders will additionally pay for building contracts.
Bids from builders like Hiranandani and Godrej Properties have been received to build the complex, according to people close to the ongoing discussions. The domestic lenders are also expected to get paid out from sale of assets as part of a larger debt restructuring package that is being worked upon.
“The Chinese banks are actively looking to settle dues through the land transaction,” said a person familiar with the transaction. He further explained that following an insolvency filing against Reliance Communications, the negotiations had intensified and a settlement was likely so as not to derail the structured debt restructuring (SDR) Rcom is currently undergoing with domestic lenders.
Mails to CDB, Rcom, and Hiranandani weren’t answered till this went to print. Godrej Properties declined comment. Under the SDR which must be resolved by December end, Rcom has also received non-binding bids from Reliance Jio Infocomm and Bharti Airtel, said another person. Jio has bid for all of the India assets of Rcom.
The bids include Rs 10,000 crore for towers, optic fibre, network operating centre and data centres a well as Rs 8,000 crore for spectrum, including Rs 7,000 crore which are due to the government on milestones in the future (deferred spectrum).
The financing of this acquisition will be through long term debt issued by the current lenders of Rcom to RJio. Reliance Jio’s estimated tower rentals to RCom over the life of the asset, according to the contract it has already entered into in 2013, is estimated at Rs 6,000 crore. “It makes sense to acquire everything given Jio will spend this money in rentals over the next 10 years,” said one of the people quoted earlier.
Airtel and Jio didn’t respond to ET’s query till the time this went to print. Apart from this, around Rs 7,100 crore of debt will be converted by lenders into shares, said one of the people. The remaining debt will continue in Reliance Communications that will run a virtual 4G network and own some more real-estate assets such as the Delhi Headquarter of the company, he added.
Of the company’s total net debt of Rs 45,000 crore, nearly Rs 5,000 crore comprises vendor payments. “At the moment it seems none of the vendors will be paid,” said another person close to matters. Rcom has successfully frustrated insolvency petitions of the vendors and they have no other recourse to recover, he added. “Preferential treatment would be given to financial lenders in any case.”
