Reliance Communications will sell telecom assets, including spectrum, towers and fibre, worth 25,000 crore by March 2018 to pre-pay lenders and exit the ongoing strategic debt restructuring (SDR) programme, chairman Anil Ambani said. The company in its new avatar as an enterprise-focused business will sell stake to global investors to pare loans further, he added.
Addressing a press conference on Tuesday, Ambani said the company had on Monday evening reached an out-of-court settlement with China Development Bank (CDB) which had filed an insolvency petition in the bankruptcy court to recover $1.78 billion, or about Rs 11,460 crore, from the telecom company.
The company plans to monetise its real estate assets to generate an additional 10,000 crore, and divest stake worth 4,000 crore in the residual RCom — which consists of the global undersea cable business, data centres and enterprise business, after having shut the wireless business — to overseas private equity investors.
After the entire process is completed, the company’s debt would shrink to 6,000 crore from 45,000 crore, said Ambani. RCom’s shares rose nearly 31% to close at 21.33 on the Bombay Stock Exchange on Tuesday.
The company, weighed down by 45,000 crore of debt and a failed merger with Aircel, has been in the midst of an SDR programme.
Banks may have to Classify RCom as NPA
Thirty-five lenders led by State Bank of India had to decide by December 28 if they would convert debt to equity. The telco was also dragged to the insolvency court by CDB and creditors such as Ericsson over non-payment of dues.
“We have had an understanding and an arrangement with all the lenders to ensure a substantial prepayment, the residual debt to be duly addressed and a viable business model for the new RCom with no risk to the banks of conversion, write-offs, etc. They (lenders) can’t have a better solution,” Ambani said.
Blaming the hyper-competition in the telecom sector for its financial troubles which even forced the “mighty house of the Tatas to gift their business”, Ambani said the essence of the agreements with the lenders was to make sure they did not need to write off debt or convert debt into equity and be saddled with assets they would find difficult to sell.
He said the company had received binding bids from 15 companies for assets, including spectrum, towers, fibre and mobile switching nodes, and that the process would be finalised in stages between January and March.
Ambani didn’t name any potential buyers. ET had earlier reported that Reliance Jio, owned by Anil Ambani’s elder brother Mukesh, is believed to have put in bids worth Rs 18,000 crore for assets including spectrum, towers, optic fibre and network operating centre. Bharti Airtel has also said it has submitted bids for some spectrum and equipment.
Bankers confirmed they have received bids for telecom assets from the likes of Jio, and also for real estate. The value of these bids would be known in the next few days.
Though the company claimed banks won’t be hit, banking sources said the December quarter may turn out to be a bad one since they have to classify RCom as an NPA and provide for it as the transaction moves along.
WIFE, SONS PRESENT
Ambani walked into the press conference with wife Tina and sons Jai Anmol and Jai Anshul. The three sat in the front row and were present throughout the media meet.
“Morally, I want to make sure that nobody who deals with us should lose any money at any time… it is your name, it is Reliance name which stands for trust and reliability … above all, I firmly believe in protecting the legacy of my father. And that was the key driving force to get any of these resolutions done…that is why I call it moral financing,” Ambani said.
Indian banks, including SBI, Union Bank, Canara Bank and IDBI Bank, will now be paid Rs 21,000 crore on a pro-rata basis of the Rs 23,000 crore they have lent, with the balance to be repaid later, Ambani said. Foreign lenders such as Standard Chartered and HSBC will get Rs 14,500 crore initially, leaving about Rs 1,500 crore of dues. Holders of two RCom bonds worth $650 million will also receive proportionate payments. He added the company expected to “soon” resolve payments worth Rs 6,000 crore that are due to unsecured creditors such as Ericsson and some tower companies.
“I didn’t know what an NCLT process was, what was IBC (Insolvency and Bankruptcy Code) process, what was SDR, what was S4A…I hope as a group and as RCom, we never ever have to understand, appreciate, analyse or face an IBC, an NCLT, an SDR or any such process,” Ambani said.
He added that though many had doubted whether RCom will be able to find buyers and exit the SDR, he never lost hope. “I am a marathon runner. I told my lenders every day that I will not give up,” Ambani told ET on the sidelines.
RCom started off as Reliance Infocomm in 2002 under the unified Reliance Industries. However, after the death of patriarch Dhirubhai Ambani and a split between the brothers, the telecom business went to Anil Ambani. RCom briefly rose to the number two position in terms of customers, but by 2009, indebtedness was on the rise amid increased competition and low prices.
Since 2010, the company has had to spend heavily to buy spectrum in auctions, raising its debt to unsustainable levels. But it hasn’t been able to compete effectively with larger rivals Bharti Airtel, Vodafone India and Idea Cellular.
The launch of Reliance Jio in 2016 with free voice for life and cheap data unleashed another price war, leaving RCom among the hardest hit. Its subsequent efforts to gain scale through a merger with Aircel fell through due to legal challenges.
REALTY PLANS
The company is looking for partners to develop 20 million square feet in the 125-acre Dhirubhai Ambani Knowledge City (DAKC) and has received binding offers from five bidders. “This real estate company SPV will have long-term debt financing of Rs 10,000 crore on a non-recourse basis,” he said.
In a simultaneous process run by Credit Suisse, the residual RCom is looking to sell stake to global investors at an enterprise valuation of Rs 15,000 crore.
Ambani said the stake sale is likely to be completed latest by June end, if not March end.
“My late father said, ‘If you can dream it, you can do it’. When we had these discussions, my father’s dream was interpreted by all as a nightmare and not a dream. It’s been a good dream, a terrific outcome for all stakeholders,” said Ambani.
The Reliance Group chief narrated an anecdote when asked what made bankers and lenders retain faith in him. Anil Ambani said he had taken his eldest son, Jai Anmol, to a lenders’ meet where all the CEOs had gathered. A CEO asked Ambani why he had brought along his son. Ambani replied that he had done the same in the ’90s, taking along five-year-old Anmol to a meeting with global investors when Reliance Industries was raising a 100-year bond. When an investor asked him what the child was doing at the meeting, Ambani recounted what he told the person: “Who do you think is going to repay this bond? It is a 100-year maturity. I will not be around.”
Source: Economic Times