Debt hit Anil Ambani led Reliance Communications gets some relief, but deadline beckons

By: | Published: October 6, 2017 4:12 AM

Lenders to Reliance Communications (RCom) have given the loss-making telecom operator two months to rope in new investors and finalise a plan to reduce its massive debt.

Anil Ambani, Reliance Communications, debt on anil ambani, debt on reliance communicationBankers said they will continue with the existing strategic debt restructuring (SDR) scheme till early December and then decide the future course of action. (Reuters)

Lenders to Reliance Communications (RCom) have given the loss-making telecom operator two months to rope in new investors and finalise a plan to reduce its massive debt.

Bankers said they will continue with the existing strategic debt restructuring (SDR) scheme till early December and then decide the future course of action.

“The company has another two months to come up with a viable proposition. At that time we will decide whether we want to go ahead with the SDR or explore other options,” a senior banker with a large state-run bank said. “The company has communicated to us that they are in talks with several other investors and they should be able to bring down their debt.”

India’s largest lender State Bank of India, IDBI Bank, Punjab National Bank and Bank of Baroda are some of the lenders who have large exposure to Reliance Communications.

In June, a consortium of lenders had given the Anil Ambani-led company seven months time to pare its Rs 45,733 crore debt and service loans regularly. As part of the SDR scheme, banks will be able to convert their loans to the company into equity after the seven months.

However, in a major setback to its debt restructuring programme, Reliance Communications on Sunday called off its merger plan with Malaysia’s Maxis Group-owned Aircel. For RCom, the merger with Aircel was crucial since it would have helped to reduce its debt substantially. Additionally, discussion with Canadian infrastructure fund Brookfield for sale of RCom’s tower business could be impacted in the absence of an upside from additional tenancies from Aircel.

Bankers said given the recent developments which has caused a slide in RCom’s share price, they are unwilling to pay a substantial premium for converting RCom’s debt into equity. Lenders said the conversion rate will be based on the average share price for 10 days before the conversion date. The average of RCom’s share price for 10 days before June 2, when the SDR was invoked, was around Rs 24.71. RCom’s share has fallen 17.35% since June.

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