A consortium of lenders to Reliance Communications (RCom) is unwilling to accede to the telco’s demand for Rs 600 crore of additional credit. The funds sought were primarily in the form of non-fund-based bank guarantees, senior bankers told FE. According to a senior banker public sector banker, RCom had sought fresh funds last week when it presented the debt reduction plans. “We have informed them that sanctioning more loans would be counter-intuitive with their plan to cut debt,” the banker said. He added the company would need to pay back a large portion of the outstanding debt before additional lines of credit could be sanctioned.
An RCom spokesperson said in an emailed reply it was a “routine non-fund requirement to meet RCom’s regulatory requirements”. “Further, it is incorrect to say that our bankers have not approved this request. They have only sought some time to consider the request and will be reverting to us shortly,” he added.
Last month, lenders to RCom had given the telco seven months’ time to pare debt and service loans regularly. The breather is part of a strategic debt restructuring (SDR) scheme, by which lenders can convert loans into equity, after seven months. In a spate of downgrades by ratings agencies in May, RCom’s ratings were lowered following delayed interest and principal payments on non-convertible debentures.
The company told lenders last week it would reduce its debt by about 60% through the sale of its tower business and via the merger with Aircel. The company plans to repay Rs 11,000 crore of its Rs 45,000-crore debt from the proceeds of the sale of a majority stake in its tower business to Brookfield Infrastructure.
Another Rs 14,000 crore debt will move from RCom’s books to the joint venture with Aircel. Sources added that RCom plans to service the yearly interest payments of around Rs 1,500 crore on the remaining debt from an expected revenue of Rs 8,000 crore after the merger and the sale.
RCom has received the approval for the merger from Sebi and is awaiting a nod from the National Company Law Tribunal. According to the merger terms, both RCom and Aircel’s controlling firm Maxis Communications will hold an equal stake of 50% each.
According to a Bloomberg report, RCom classified Rs 22,550 crore of borrowings as non-current liabilities as of March 31, pending formal confirmation by lenders for waivers on certain loan covenants, citing notes from its earnings results published on May 27.
The company reported a net loss of `948 crore in Q4FY17. The firm’s debt-equity ratio stood at 1.61 times on March 31 versus 1.39 a year ago while the interest coverage ratio fell to 1.84 times from 3.3 times a year ago.
Meanwhile, FE had reported that Chennai Network, a subsidiary of GTL, is believed to have objected to the merger in January this year. This was on the grounds that Aircel has not received a no objection certificate from it for the merger with RCom.