Lenders have given an additional time of seven months to to Reliance Communications to raise funds from two merger and asset sale deals, giving a temporary but major relief to the beleaguered telecom firm, ET Now reported citing unidentified sources. The lenders will consider a corrective action plan under the SDR (strategic debt restructuring) route, the report said. However, Reliance Communications’ shares failed to cheer to the news and were trading week, down 0.72% at Rs 20.60 on BSE.
The Anil Ambani-controlled company, which has delayed repayment of loans to more than 10 banks, plans to repay Rs 25,000 crore worth of loans to its lenders with proceeds from its deals with Aircel and Canada’s Brookfield Infrastructure. Reliance Communications is merging its wireless business with rival Aircel and is also selling a 51 percent stake in its radio masts business to Canada’s Brookfield Infrastructure Group for Rs 10,000 crore.
ET Now reported today that the banks have given seven months to Reliance Communications conclude the two deals and get the proceeds. Reliance Communications, the most leveraged telecom company in India with debt-EBITDA ratio at 9x, expects to repay 55% of its debt from the proceeds. This resolution by the lenders has allayed the fears of a potential loan default by a company, which could be credited with bringing the mobile phone telephony to the masses in India.
Earlier this week, lenders led by State Bank of India (SBI) reportedly started working on a plan to rejig Reliance Communications debt by looking at SDR route to gain greater control in decision-making at the company, which will help to close deals in a speedy manner.
Notably, ratings agencies Fitch and Moody’s this week downgraded Reliance Communications’ debt rating deeper into junk grade, spelling fresh troubles for the company. Moody’s cut it to Caa1 from B2, while Fitch lowered its rating on the company to CCC, implying that some kind of default on the company’s debt is a “real possibility”.
Fitch had also raised concerns over Reliance Communication’s proposed deals with Aircel and Brookfield, saying that RCom’s weakening cash generation from core wireless business may hamper plan to demerge wireless business into 50:50 JV and sell 51% of tower business Reliance Infratel. Further, it said that even if the transactions happen and debt is paid down, the residual business is likely to be saddled with too much of debt.