Mumbai: Anil Ambani-led Reliance Communications Ltd (RCom) presented a fresh debt repayment plan to its creditors on Monday which envisages raising Rs27,000 crore through sales of assets and lenders converting a portion of their loans into equity, giving them majority control.
The firm has about Rs45,000 crore in debt and last week announced that it was going to shut down its 2G services in about a month and continue to operate 3G and 4G services till the time they remain profitable.
According to the new plan, which is yet to be approved by banks, RCom will sell part of its spectrum, fiber and tower assets which are likely to fetch about Rs17,000 crore. The firm’s senior management said that rivals such as Mukesh Ambani-owned Reliance Jio Infocomm Ltd have shown interest for “several" of its assets. It also said that the joint lending forum, a grouping of its creditors, will handle asset sales transactions and it won’t strike any ‘bilateral’ deals.
“There will not be any bilateral dealings anymore. The lenders will decide the best deal available from now on," said Garg. Jio, for instance, “was not interested in bilateral dealings and wanted the process to be transparent," said Punit Garg, executive director at RCom. The lenders have hired SBI Capital Markets as the adviser for the asset sales, he added.
Garg said the firm expects to complete the debt reduction plan by March 2018. “None of these transactions require regulatory clearances and will be easy to execute."
On being asked if it has received approval for the plan, Garg said “do you think lenders can refuse a zero write-off plan. They got to be so happy and thrilled."
Apart from spectrum and other telecom asset sales, RCom is planning to raise an additional Rs10,000 crore through its properties in Dhirubhai Ambani Knowledge City in Navi Mumbai and Delhi among others.
Further, the plan proposes that lenders convert Rs7,000 crore of their loans into equity, giving them control of the firm. “They will also have the freedom to bring in an external investor who will take a call regarding the change in management," said Garg.
At Monday’s closing price of ₹ 15.7 a share, RCom had a market capitalization of ₹ ,907 crore. If lenders convert at this price, they could get a 64% stake in the firm.
The sales of telecom and real estate assets, and the conversion total up to Rs34,000 crore. Another Rs5,000 crore worth of debt is unsecured.
“We will resolve the unsecured portion of the debt after tackling the secured portion," said Garg.
Subject to the plan materializing, the telecom firm will be left with a debt of Rs6,000 crore. It is believed this will be sustained after its winds up its 2G and 3G voice businesses, and only focus on the business-to-business and 4G businesses.
In June 2017, RCom lenders had invoked the strategic debt restructuring scheme. It allows lenders to take over management control. The lenders, however, had given a seven-month breather to the firm till December.
Under its earlier deleveraging plan, RCom had said it would cut its debt by 60% of its debt by December through a merger with Aircel Ltd and sale of majority sake in its tower business to Canada-based investment firm Brookfield Infrastructure.
The Aircel plan collapsed due to regulatory and legal hurdles. The Brookfield deal is still on but other investors can also bid now. “The deal valuation is likely to be revised downwards," Garg said.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.