Reliance Communications' lenders are now staring at a possible haircut of Rs 6,000 crore in their outstanding loans to the company as its merger with Aircel has collapsed.
The RCom-Aircel merger has collapsed, and the lenders of debt-laden Reliance Communications are worried. The lenders, including the State Bank of India, have huddled up to hold meeting next week in a bid to find a way to bail out the company from its Rs 45,000 crore debt, who are now staring at a possible haircut of Rs 6,000 crore in their outstanding loans to the company.
The Anil Ambani-led company had plans to repay Rs 25,000 crore worth of loans to its lenders with proceeds from its deals with Aircel and Canada’s Brookfield Infrastructure. It is not just the RCom-Aircel merger, but Reliance Communications’ Rs 11,000 crore deal with Canada’s Brookfield Infrastructure is also under review, and is reportedly going to re-negotiate the deal at a lower price due to lack of additional Aircel tenancies. The uncertainties have left the lenders in jittery, but are keen to see the Brookfield deal through. The lenders may have to take over 26% of the debt as equity, CNBC-TV18 reported.
Reliance Communications shares tanked over 10% at Rs 17.15 at the end of Tuesday’s close after the company called off a proposed merger with rival Aircel. Reliance Communications scrapped its merger with Aircel citing legal and regulatory uncertainties and interventions by various parties.
In June, lenders had given an additional time of seven months to Reliance Communications to raise funds from two merger and asset sale deals, ET Now had reported. The lenders will consider a corrective action plan under the SDR (strategic debt restructuring) route.
The company had delayed repayment of loans to more than 10 banks. While for Reliance Communications’ lenders, insolvency is likely to be the last resort, Ericsson India, earlier this month, filed insolvency petitions against the debt-laden telecom company and its subsidiaries. Ericsson India is seeking a total of Rs 1,156 crores from the company and two of its subsidiaries, Reuters reported.
Reliance Communications reported its third quarterly loss in a row last month. Earlier this year, rating agencies Fitch and Moody’s downgraded Reliance Communications’ debt rating deeper into junk grade. Moody’s cut it to Caa1 from B2, while Fitch lowered its rating on the company to CCC, implying that some kind of default on the company’s debt is a “real possibility”.