China Bank targets Reliance Communications, 31 lenders look to fight back

Published On: 01, Dec 2017 | Source: financialexpress.com

Reliance Communications (RCom) on Thursday said a majority of its lenders have decided to oppose the insolvency petition of China Development Bank (CDB) against the telco. Earlier this week, Bloomberg, citing a person familiar with the matter, had reported that CDB had asked the NCLT to place billionaire Anil Ambani’s RCom under insolvency proceedings after the unprofitable mobile phone operator failed to repay debt. RCom owes China Development Bank about Rs 9,000 crore, Bloomberg said. In a regulatory filing on Thursday, the company said at a meeting on November 29, a clutch of 31 lenders (foreign and Indian banks) decided to oppose CDB’s insolvency petition at the Mumbai bench of the National Company Law Tribunal (NCLT). “The lenders also decided to appoint J Sagar Associates as their legal counsel to oppose the said CDB petition at the admission stage itself,” an RCom spokesperson said in the statement. The telco said on Monday it had not been not served any notice regarding the application filed. “The company is engaged through the joint lenders’ forum (JLF) with all its lenders for a successful resolution of the strategic debt restructuring (SDR) process. The company is, therefore, surprised by the untimely and premature action of China Development Bank of filing an application at NCLT,” RCom said in a regulatory filing.

In October, RCom had presented a fresh debt restructuring plan to its JLF. The plan involves conversion of Rs 7,000-crore debt by lenders into a 51% stake in the telco. The company has also told lenders it will monetise part of its assets (spectrum, towers, fibre assets and media convergence nodes) worth Rs 17,000 crore and repay Rs 10,000 crore through sale of real estate assets. Going by the proposal, the company’s debt will reduce to about Rs 6,000 crore after the monetisation exercise.

RCom had said in October it was working closely with SBI Capital Markets, the advisor appointed by the lenders, to run a competitive bidding process in a transparent manner to monetise the spectrum, tower, fiber, media convergence nodes and prime real estate assets. In June, lenders had decided to convert a large portion of their loans to equity using the Reserve Bank of India’s strategic debt restructuring scheme that allows banks to retain the present classification of the loan for seven months without worrying about it turning non-performing. An SDR allows banks to convert debt at a price below the current market value and permits them to own 51% or more of the equity of the company.