Reliance Communications(RCom) on Thursday told the National Company Law Tribunal (NCLT) it is “running against time” to close the merger of its wireless business with Aircel, which will help it repay a majority of its loans to its creditors.
Representing the company, senior counsel Janak Dwarkadas told the tribunal at a hearing that RCom is also in talks to address major lender China Development Bank’s (CDB) apprehensions about the deal. “(The) parties (Rcom and CDB) are negotiating as we speak. We are hopeful of some agreement.” The next date for hearing has been fixed for August 2.
The Aircel deal and a stake sale in the tower business are expected to reduce RCom’s debt of around Rs 45,000 by 60%. The beleaguered telecom company needs to complete the merger as well as the tower sale within the seven-month breather it has from lenders, which expires in December 2017.
CDB had objected to the $6-billion merger of debt-ridden telecom operators RCom and Aircel even after regulators, such as the Competition Commission of India (CCI), had cleared on the deal. The bank, represented by senior counsel Darius Khambata at the NCLT, had sought a creditors’ meeting with both companies ahead of the merger to discuss the loan-settlement terms.
RCom’s representatives assured the tribunal that a creditors’ meeting would be called because it is important for the company to close the deal. “If you keep hearing till November, the debt will be declared NPA (nonperforming assets),” Dwarkadas told the two-member bench comprising judges BSV Prakash Kumar and V Nallasenapathy, adding that nine of its lenders had given a go-ahead to the merger.
ET had earlier reported that Aircel sourced equipment from Chinese vendors such as Huawei and ZTE, which are backed by loans from the Chinese banks like CDB. Additionally, RCom has over $1 billion in loans from Chinese banks. According to the rules, a merger needs the approval of 75% of lenders. RCom had sought a waiver of the rule on the grounds that the deal with Aircel only affected shareholders, not lenders.
A joint lenders forum (JLF), formed last month by banks to prevent RCom’s debt from turning into an NPA, decided to invoke a strategic debt restructuring (SDR) scheme on RCom, which allowed a seven month standstill on the mobile carrier’s loan-repayment obligations till December.
Ratings agencies also downgraded the company last month, citing its default on the principal and interest of some non-convertible debentures. RCom is aiming to close both the deals – merger with Aircel and sale of Reliance Infratel – by September. More than 20 banks have lent to RCom, of which State Bank of India with Rs 2,375 crore has the largest exposure followed by Punjab National Bank (Rs 1,350 crore) and IDBI Bank (Rs 1,230 crore).
SDR is designed specifically to bypass legal hurdles faced by banks while taking over defaulting companies. A bank can take management control of a defaulter by converting loans into equity but has to find a buyer for its stake within 18 months. The telco posted its first ever annual loss since inception—of around Rs 1,285 crore — in the last fiscal year due to the intense competition in the sector.
Source: Economic Times