‘Do it before the year ends’ was both literal and daunting for Anil Ambani, whose troubled Reliance Communications had to find out a way to repay its huge pile of loans before December 31. After the company got a breather from its lender for six months in June to strategic restructure its debt, the trouble ride for RCom continued only to stop just three days before hitting the deadline, interestingly, by putting company’s asset on winter sale for Anil Ambani’s elder brother.
RCom, on Thursday, said that it has signed definitive binding agreements with Reliance Jio Infocomm Limited (RJio) for sale of wireless spectrum, tower, fibre and Media Convergence Node (MCN) assets. The size of the deal has not been disclosed yet, but the asset valuation of Rs 20,000 crore-Rs 25,000 that is being pegged by analysts is good enough for RCom. The company 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.
Interestingly, RCom came up with at least three major plans for strategic debt restructuring (SDR) since June. According to the first plan, RCom was supposed to have two merger deals with Aircel and Brookfield Rs 14,000 crore and Rs 11,000 crore respectively, or a total of Rs 25,000 crore. First, the deal with Aircel fell flat due to “legal and regulatory uncertainties” and interventions by various parties; then, the deal with Brookfield failed to take off over price negotiations. Both within a month.
By November, the company had plan B. The company announced its plans to repay its debt — converting Rs 7,000 crore debt into 51% equity and handing over to banks. The company claimed that under the new plan there will be zero write-offs for the lenders. On the day, RCom’s market valuation stood at Rs 3,900 crore only.
While in the past two months RCom had been desperately trying to dodge debt restructuring hanging on its heads, trouble kept brewing. Even company’s Chinese lenders dragged it to the insolvency court for Rs 9,000 crore debt. It was already in hot-water as, in September, Ericsson India had already moved to National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy (IBC). Besides, RCom had to shut its 2G and DTH services. Its shared tanked drastically several times and got international attention when the company even defaulted on bond interest payments.
On December 26, just days before the deadline for banks’ conversion of debt into equity, Anil Ambani re-announced his massive debt-recast plan with zero write-offs, which ultimately turned out to be a rescue mission by big brother Mukesh Ambani’s Reliance Jio. The company announced to exit the strategic debt restructuring plan with a zero write-off to lenders and bankers by monetising the assets of its wireless business. This time, the company withdrew the earlier plan of conversion of debt into equity.
With the RCom- Reliance Jio deal, Anil Ambani seems to have saved RCom from slipping under banks’ control but with this strategic debt restructuring (SDR) exit, new RCom would be transformed into a B-to-B business.
First published on 29 December 2017 on www.financialexpress.com