RCom shares jump on report that bondholders hired advisers
Report that RCom’s bondholders hired legal advisers gives some hope of recovery for investors in the company, which defaulted on its dollar-denominated notes last month
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Mumbai: Shares of Reliance Communications Ltd (RCom) soared nearly 45% in intra-day trade on Wednesday, and logged their biggest single-day gain at close in an otherwise lacklustre Mumbai market. This came after a report said bondholders of the company have hired legal advisers, giving some hope of recovery for investors in the troubled company which defaulted on its dollar-denominated notes last month.
Earlier in the day, Bloomberg reported, citing a document, that certain bondholders of RCom, who hold a significant percentage of securities, have formed a committee, which has appointed PJT Partners Inc. as its financial adviser and Kirkland & Ellis Llp as its legal adviser.
The group has commenced discussions with the company, it said.
“Any lender to RCom would opt for inorganic approach to recover money, rather than the organic approach, as they have some assets such as spectrum, fibre and tower assets,” said Deven Choksey, group managing director, KR Choksey Investment Managers Pvt. Ltd.
“This development of forming a committee and hiring advisers could be a step in line with that resolution,” added Choksey.
Earlier in the day, RCom shares jumped as much as 44.95% to Rs18.51, a level last seen on 24 October.
RCom shares closed up 35.24% at Rs17.27 on the BSE, its highest close since 2 November. It also logged its biggest single-day gain since listing. In comparison, BSE’s 30-share Sensex shed 0.18% to close at 33,777.38 points.
Other Anil Ambani-owned companies traded mixed. Reliance Capital Ltd, Reliance Power Ltd and Reliance Infrastructure Ltd rose 7.14%, 6.89% and 5.21% respectively. Reliance Home Finance Ltd shed 1.77% and Reliance Nippon Life Asset Management Ltd gained 1.07%.
In November, the telecom operator failed to pay a coupon on its 2020 dollar bonds before the expiry of a grace period. The firm had informed stock exchanges that it was on a “standstill period” for interest and principal repayments until December 2018.
Legal experts are of the view that the bondholders “collectively” will be in a better position to negotiate with the firm . “Bondholders have joined hands, as collectively they will be in a better position to bargain with the company and the creditors. Also, it is likely that they would seek an out-of-court settlement as insolvency proceedings against the firm will entail greater haircuts for everyone, especially for unsecured bondholders,” said Ramesh Vaidyanathan, founder and managing partner at Advaya Legal, a Mumbai-based law firm.
Lenders of RCom invoked strategic debt restructuring against the firm in June, allowing them to convert debt into equity. RCom had received a breather from the lenders till December 2018 to complete sales of some assets and pare its debt. RCom’s total debt was Rs44,345 crore at the end of fiscal 2016-17.
The telecom firm expected to pare its debt by 60% by December 2017 through the merger of its wireless division with Aircel Ltd and the sale of its tower business to Canada based Brookfield Infrastructure Group. The transactions, however, did not materialize due to opposition from operational creditors and legal hurdles.
Financial and operational creditors of RCom such as China Development Bank and Ericsson India Pvt. Ltd have filed petitions against the firm under the insolvency and bankruptcy code. The petitions are yet to be admitted by the National Company Law Tribunal.
An RCom spokesperson declined to comment on the development.
The joint lenders’ forum for RCom will meet during the last week of December to discuss the next course of action.
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.
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