Reliance Communications, Aircel merger and sale of tower business to Brookfield cases: NCLT dismisses objections

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Mumbai | Published: August 15, 2017 7:19:44 AM

Dismissing objections by several parties, the Mumbai bench of NCLT on Monday admitted two petitions to merge Reliance Communications with Aircel and another regarding the sale of RCom’s tower business to Brookfield Infrastructure.

Reliance Communications, Reliance Communications news, Reliance Communications latest news, Reliance Communications aircel, Reliance Communications aircel merger, ncltSources 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 following the merger and the sale. (Reuters)

Dismissing objections by several parties, the Mumbai bench of the National Company Law Tribunal (NCLT) on Monday admitted two petitions to merge Reliance Communications (RCom) with Aircel and another regarding the sale of RCom’s tower business to Brookfield Infrastructure. The tribunal said it will hear the case on September 13. The development saw the RCom stock rallying on the BSE by as much as 18.8% during the day, ending at Rs 24.10, up 16.4% from its previous close.

Objectors to RCom’s merger plans included operational creditors to the company like Chennai Network Infrastructure (CNIL) — a GTL subsidiary — Ericsson and Bharti Infratel. Even the department of telecommunications (DoT) had said that the merger needed to be first cleared by the Supreme Court since it is hearing a case against Aircel’s Malaysian promoters in an alleged corruption matter. In the affidavit filed before the NCLT, Beni Chatterjee, counsel for DoT, cited a Supreme Court order dated January 6, 2017, which had restrained Aircel from “earning of any revenue by using the 2G spectrum licences which were originally granted” to the telco.

The merger and tower sale, if they happen, will result in a substantial debt reduction for RCom. The telco had told lenders that 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. Another Rs 14,000 crore of 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 following the merger and the sale.

It may be recalled that a clutch of financial creditors (secured and unsecured) had objected to the tower sale and merger of RCom and Aircel alleging a meeting of creditors had not been convened by RCom and that their approval had not been sought.

On its part, RCom, citing a Mumbai NCLT order dated March 15, said the court had granted it some dispensation. However, objectors responded saying the order had been misinterpreted by RCom. RCom had informed the court on July 27 that it does not intend to call a meeting of creditors as it believed it was not necessary. While China Development Bank(CDB), Standard Chartered Bank and HSBC Daisy

Investments had initially objected the petitions, they later consented to the merger proposal being admitted to the court on certain conditions. RCom owes the Chinese lender close to Rs 9,000 crore. The telco’s gross debt stood at Rs 45,000 crore in FY17, of which the company owes domestic lenders Rs 25,000 crore. RCom has received the approval for the merger from the Securities and Exchange Board of India and is awaiting a nod from the NCLT. According to the merger terms, both RCom and Aircel’s controlling firm Maxis Communications will hold an equal stake of 50% each in the merged entity.

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