Aircel resolution: Lenders likely to get Rs 6,630 crore against Rs 58,670 crore

Published: June 20, 2020 1:01 AM

UVARC expects to garner Rs 800-1,300 crore from spectrum held by Dishnet Wireless, subject to approval from department of telecom (DoT).

The total debt of Aircel stands at Rs 58,670 crore.The total debt of Aircel stands at Rs 58,670 crore.

By Ankur Mishra

The resolution plan for bankrupt telecom company Aircel is likely to fetch financial creditors Rs 6,630 crore from UV Asset Reconstruction Company (UVARC), as per approval granted by the Mumbai bench of the National Company Law Tribunal (NCLT). The total debt of Aircel stands at Rs 58,670 crore.

The resolution plan implies an around 89% haircut for lenders, without any substantial amount to be paid upfront. The lenders will receive payments over five years through monetisation of assets, realisation of pending claims and issuance of zero-coupon optionally convertible debentures (ZOCD) worth Rs 3,750 crore. UVARC will invest Rs 11 crore, in which Rs 4 crore will be incurred towards initial expenditure for restarting the identified business operations. Initially, lenders will hold 24% and UVARC will hold 76% in the reconstructed company as per resolution plan. There is also a provision of increasing financial creditor’s stake to 74%, in case the plan does not materialise.

The two-member bench of the NCLT, Mumbai comprising Rajasekhar VK and Ravikumar Duraiswamy observed, “UV ARC’s plan appeared to be for ‘winding up or liquidation’ instead of being a resolution plan.” However, the tribunal granted its approval stating that it was bound by the Supreme Court’s decision that prevents it from interfering into the merits of the commercial decision taken by the committee of creditors (CoC). The CoC had earlier approved UVARC’s resolution by a margin of 73.88% vote, which was more than the statutory minimum requirement of 66% vote as per the Insolvency and Bankruptcy Code (IBC).

Ashish Pyasi, associate partner, Dhir and Dhir Associates, said, “The timelines in the plan mostly suggest outer limits, as this plan is more of monetisation of assets and then repayment from such proceeds.” The emphasis on resolution rather than liquidation is visible as spectrum being one of the most valuable assets for this company would have become zero in case liquidation, Pyasi further said.

UVARC expects to garner Rs 800-1,300 crore from spectrum held by Dishnet Wireless, subject to approval from department of telecom (DoT). Similarly UVARC is counting on pending refunds of Rs 298 crore by DoT, as per the resolution plan. The identified businesses which UVARC finds feasible to generate revenue are bulk SMS, data centre and leasing of towers. This is expected to generate a revenue of Rs 69 crore in the first year, Rs 96 crore in the second year and Rs 125 crore in the third year.

“This will set the precedent for other cases as previous similar attempts from creditors and resolution applicants failed for some reason or the other,” said Ashish Pyasi. UVARC had submitted resolution plan for Aircel and its allied companies Dishnet wireless, Aircel Cellular. The telecom company had filed for voluntary insolvency in February 2018, citing liquidity concerns and inability to service debt.

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