Reliance Communications’ (RCom) shares on Monday nosedived over 6% on the back of news that its merger deal with Brookfield Asset Management has collapsed and that the company is planning to shut down voice call service from December 1. The shares of debt-ridden Rcom at Monday’s close was down 6.7% at Rs 15.85, and hit day’s lowest at Rs 15.50.
“The merger will not proceed and therefore our transaction as previously announced will not proceed either. However, we continue to monitor the evolving situation to determine if revised terms can be agreed upon,” Brookfield Infrastructure Partners said in an SEC filing on November 3.
The merger between RCom and Brookfield collapsed nearly a month after the company scrapped its merger with Aircel citing legal and regulatory uncertainties and interventions by various parties. Brookfield reportedly wanted to renegotiate the deal at lesser than the agreed amount due to lack of additional Aircel tenancies. Meanwhile, PTI reported RCom will shut down voice call service from
December 1 and its customers can move to other networks by the end of the year, as per direction issued by telecom regulator TRAI last week.
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. 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. However, both the deals have now collapsed.
Last week, the company announced another plan to repay its debt as the December deadline is inching closer. The company proposed 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-off for the lenders. As on Monday, RCom’s market valuation stood at Rs 3,900 crore only.
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.