Banks to discuss RCom debt restructuring proposals today (2024)

Mumbai: Lenders to Reliance Communication Ltd (RCom) have convened a meeting on Friday to discuss restructuring proposals for the debt-ridden telecom firm, said two bankers directly involved in discussions. On Thursday, ratings agency Fitch said “some kind of default is a real possibility", while cutting RCom’s debt rating to junk status.

The restructuring proposals could look at all available recast tools like corporate debt restructuring (CDR), strategic debt restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A), said one banker on condition of anonymity.

Under SDR, banks have the ability to convert part of their debt in a stressed company to 51% equity, allowing them to take operational control and sell the company to a suitable buyer. Under S4A, banks can break up the debt into sustainable and unsustainable halves, allowing deep restructuring in the latter, while the former continues to be serviced.

“Lenders are currently looking to give more time to the company under one of these restructuring schemes," said the first person cited earlier.

In an investor call earlier this week, the company had said it had sought refinancing for some its debt even as it was seeking approvals from its bankers for selling its telecom towers business and merging its wireless business with Aircel Ltd, steps which will allow the company to pare debt.

It has said that it would get Rs11,000 crore from the tower assets sale. The union with Aircel would transfer Rs14,000 crore debt to the merged company.

RCom said it expected the deal to be completed by September.

“Lenders are awaiting the final Supreme Court verdict in the matter of Aircel before we give the nod for the deals," the banker added. Earlier this year, the Supreme Court had threatened to revoke Aircel’s licence if its Malaysian owner T. Ananda Krishnan did not appear in court in a case of corruption against him. The court had restrained the transfer of Aircel’s 2G licence to any other telecom company.

A RCom spokesperson declined to comment.

Separately, Bloomberg reported Rcom was in talks with Chinese banks for a waiver on interest payments on loans of about $1billion until September. According to Bloomberg data, the company has $925 million facility due in 2019 borrowed from China Development Bank, Export-Import Bank of China and Industrial and Commercial Bank of China.

RCom’s problems spiralled out of control after a slew of downgrades by rating agencies owing to its mounting debt. Care Ratings and Icra Ltd downgraded the telecom operator’s short- and long-term debt to default.

This was followed by Fitch downgrading the company’s long-term foreign and local currency debt to junk status on Thursday. Fitch said the firm may struggle to refinance its maturing short-term debt, given declining earnings and delays in executing asset sales. The company’s capital structure is “unsustainable" and it does not expect operating cash flows to improve, Fitch said.

At the end of March, RCom had a debt of Rs47,332 crore on its books against Rs39,828 crore a year ago. RCom reported its first fiscal year loss on Saturday as competition from new entrant Reliance Jio Infocomm Ltd, which offered free calls and data as part of its September launch, hurt the entire telecom industry.

Bloomberg contributed to this story

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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ABOUT THE AUTHOR

Gopika Gopakumar

Gopika Gopakumar has worked for over 15 years as a banking journalist across print and television media. Her expertise lies in breaking big corporate stories and producing news based TV shows. She was part of the 2013 IMF Journalism Fellowship Program where she covered the Annual & Spring meetings of the International Monetary Fund in Washington D.C. She started her career with CNBC-TV18, where she also produced a news feature show called Indianomics and an award winning show on business stories from South India called Up South. She joined Mint in 2016.