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Update: RCOM’s lenders now have rights to convert debt into equity

Update (June 5th, 2017): RCOM has confirmed in a statement that its lenders have decided to initiate Strategic Debt Restructuring (SDR) process and had given the company time till December 2017 for repayment of all outstanding debt. The telco said that it plans to pay out Rs 25,000 crore in debt to its lenders by that time, bringing down its overall debt by 60%. If the company fails to make the payment by December, lenders will have the right to convert a part of the debt into equity shares.

A consortium of 22 lenders of Anil Ambani led Reliance Communications (RCOM) have decided to initiate Strategic Debt Restructuring (SDR) process, which allow lenders to convert their outstanding debt payment from RCOM into equity shares, according to this Bloomberg Quint report. The lenders met on Friday to hasten up RCOM’s outstanding debt payment of Rs 25,000 crore. RCOM said in a statement this week that it will honor the outstanding payments by September 30th  after its two business deals—Aircel merger and Brookfield tower sale—gets completed.

The company’s net debt stood at Rs 44,345.3 crore as of Q4FY17, which is an increase of 3.4% when compared to Rs 42,802.5 crore debt in Q4FY1

SDR is a debt recovery method offered by the RBI, which allow bankers to convert parts of their loan into equity shares of at least 51%. This gives operation control to bankers, which gives them an option of selling the majority shares to a suitable buyer. However, as per the report, the lenders are only considering holding the equity shares until the debt is repaid. The meeting was hurriedly called by State Bank of India which is owed close to Rs 2,500 crore by RCOM, the report added.

RCOM said this week that its merger with Aircel’s wireless business unit which was signed in September last year will help the company reduce debt by Rs 14,000 crore, while its tower sale deal with asset management company Brookfield will additionally contribute to Rs 11,000 crore in debt reduction. However, RCOM is yet to receive approval from lenders on theses proposed transactions.

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Earlier the same week,  credit rating firms including Moody’s, Credit Analysis & Research Limited (CARE) and India’s ICRA have downgraded RCOM’s credit outlook today. “The reasons for these revisions include RCOM’s weak operating performance, high leverage, the weak internal cash flow generation against sizeable debt servicing obligations and delays in debt servicing by the company,” RCOM said in a statement.

Financials

For the quarter ended March 31st 2017 (Q4FY17) RCOM reported:
-Losses of Rs 966 crore, up 81.9% from Rs 531 crore loss in the previous quarter.
– Total consolidated income of Rs 4524 crore, a drop of 8.7% QoQ and down 32.1% YoY.
– India operations contributed about 86.5% of its overall revenue at Rs 3916 crore during the quarter.
– Indian operations’ revenues and EBITDA stood at Rs. 3,916 crore and Rs. 908 crore respectively

 

 

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