Rel Info wants to prepay $300 m syndicated loan

Mumbai, Aug 4 | Updated: Aug 5 2005, 05:30am hrs
Reliance Infocomm, which is now under the Anil Dhirubhai Ambani Enterprises stable, may be on a collision course with a clutch of banks over a seven-year, $300 million syndicated loan contracted in October 2004. It now wants to prepay the loan, six years ahead of schedule, since it feels its net worth is now comfortable, and the terms of the loan do not suit it.

The loan, which was lead-arranged by ABN Amro NV, also had a clutch of other foreign and Indian banks as a part of the syndicate. While Reliance Info sources told FE the company wanted to prepay the loan six years ahead of schedule and was readying prepayment notices, there was no confirmation of this from lead arranger ABN Amro. The loan was at a rate of around 170 bps over the London Inter-bank Offered Rate (Libor).

Reliance Info sources claimed that with the conversion of Reliance Industries Rs 8,100 crore preference shares into equity recently at Rs 32 a share, the net worth of Reliance Info had now increased substantially to about Rs 12,600 crore, and therefore, there was little reason to continue with the loan.

The debt-equity ratio, which earlier stood at 3:1, had now turned into a more comfortable 0.75:1, the Reliance Info sources claimed. However, banking sources counter this, saying the conversion of preference shares into equity did not alter the companys funds requirement, and that the company still required funds.

Some banks claimed Reliance Info could, in fact, be seeking to refinance the loan at a lower rate, and for a higher amount of $500 million. They want to refinance it, not prepay, a top banker told FE.