Why Chinese banks want to take Anil Ambani’s RCom to insolvency but Indian lenders do not

Published On: 06, Dec 2017 | Source: financialexpress.com

Last month, China Development Bank (CDB) moved to National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy (IBC), which Reliance Communications termed as “premature action”, and said that as many as 31 domestic and global lenders were going to oppose the move.

But, there is, perhaps, the trust issue which Chinese lenders are having as two more have decided to support CDB to put RCom into insolvency court, while domestic lenders seem to have clung on to hope to recover more from the debt-restructure plan the company had announced in October end, even as its merger deal with Aircel and Brookfield have collapsed and it had defaulted even on bond payments.

RCom claimed that under the debt-restructure plan there will be zero write-off for the lenders, which is likely making domestic lenders tilt against the push to RCom towards insolvency, while Chinese lenders are just frustrated that the company did not keep promises it made previously on debt repayment.

Reuters on Tuesday reported quoting three unnamed people that two major Chinese lenders plan to support a move by China Development Bank to put RCom into insolvency court as they seek to recover about Rs 9,000 crore in debt. Industrial and Commercial Bank of China (ICBC), the country’s biggest-listed lender by assets, and Export-Import Bank of China plan to back CDB, Reuters reported.

The Anil Ambani-owned company has a debt of Rs 9,000 crore from the China Development Bank. The company was also dragged by Ericsson India to NCLT for unpaid dues of nearly Rs 1,150 crore. RCom is reeling under a total debt of Rs 45,000 crore. Of this, Rs 25,000 crore is domestic debt and remaining Rs 20,000 crore is in the form of foreign loans and bonds. RCom classified Rs 22,550 crore of borrowings as non-current liabilities.

In June this year, RCom got a seven-month breather from its lenders as part of a strategic debt restructuring (SDR) scheme. RCom said it would repay its Rs 25,000 crore debt from two merger deals with Aircel and Brookfield of Rs 14,000 crore and Rs 11,000 crore respectively, which Bloomberg called “summer sale”.

Both deals collapsed, following which the company has announced another plans to repay its debt — converting Rs 7,000 crore debt into 51% equity and handing over to banks. RCom said the company will be raising another Rs 17,000 crore to repay the debt through the asset sale. Of this, the company will raise around Rs 10,000 crore through the sale and commercial development of real estate assets.