Reliance Communications (RCom), which has lost over a fifth of its market value in the last three days, is understood to have asked lenders to refinance a big part of its domestic debt of Rs 25,000 crore until December.
Reliance Communications (RCom), which has lost over a fifth of its market value in the last three days, is understood to have asked lenders to refinance a big part of its domestic debt of Rs 25,000 crore until December, sources told FE. The telco’s total debt is around Rs 45,000 crore, of which Rs 20,000 crore is in the form of foreign loans and bonds. RCom’s debt has been downgraded by rating agencies for its fragile liquidity position.
The telco has sought a moratorium of six months on interest payments, according to three lenders aware of the development. However, since banks cannot reschedule payments without restructuring the debt, they may prefer to refinance it. “Since restructuring will attract the same provisioning as bad loans at 15%, the joint lenders’ forum (JLF) is now looking at a refinance option,” a banker said.
The banker said RCom has assured the JLF the fresh short-term loans will be used to repay existing loans. Also, the new loans would be repaid in full by December. 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 Infrastructure.
Another Rs 14,000 crore debt will move from RCom’s books to the joint venture with Aircel. Lenders, led by State Bank of India, are understood to have okayed refinancing debt to the tune of Rs 14,000 crore in the proposed RCom-Aircel joint venture. RCom is believed to be confident of being able 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 post the merger and the sale.
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RCom has received the approval for the merger from the Securities and Exchange Board of India. According to the merger terms, both RCom and Aircel’s controlling firm Maxis Communications will hold an equal stake of 50% each.
Bloomberg reported on Monday that the telecom company had classified Rs 22,550 crore ($3.5 billion) of borrowings as non-current liabilities as of March, 31 pending formal confirmation by lenders for waivers on certain loan covenants, according to notes from its earnings results published on May 27. The company reported a net loss of Rs 948 crore in Q4FY17 compared to an estimated loss of 818 crore. The debt-equity ratio stood at 1.61 times on March 31 versus 1.39 a year ago. The interest coverage ratio fell to 1.84 times from 3.3 times a year ago.
Meanwhile, Moody’s on Tuesday downgraded Reliance Communications’ corporate family rating and senior secured bond rating on account of weak performance and “fragile” liquidity position. The company was also recently downgraded by CARE Ratings and Icra.
The ratings assigned to the bank loans, NCD issue and short-term debt issue of the company were lowered to CARE D owing to a delay in the servicing debt obligations. Reliance Communications has delayed the interest as well as principal repayments due on its NCDs and the NCD instalment of Rs 375 crore due on February 7, 2017, was paid on April 10, 2017, CARE said in a release.