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Reliance Communications bondholders approve Jio infra deal

Investors holding bonds worth US$ 300 million in Reliance Communications (RCom) have approved the sale of its assets to Reliance Jio in a meeting held in London, the company reported to BSE India. The bondholders also approved the release of their security on RCom’s assets and agreed to accept part prepayment of their outstanding bonds which were due to mature in 2020.

Sale of RCom’s real estate assets in Dhirubhai Ambani Knowledge City, Navi Mumbai was also approved, and the company’s final residual financial debt is expected to be up to Rs 7000 crore (US$1,079 million). Noteholders holding in aggregate 44% of the bond worth were present at the meeting, with 81% of the votes being cast in favour of the resolutions.

The Competition Commission of India, which is a statutory body of the government responsible for preventing activities have an effect on competition, also recently gave a go-ahead to the deal.

Trouble remains

Despite stakeholder approval, the deal cannot be executed yet. This is because many companies have filed cases against RCom for recovering their dues. These include Fortuna Public Relations, which claims the RCom owes it Rs 47.65 lakh; Manipal Technologies which has moved to recover Rs 2.74 crore; and Tech Mahindra, which has agreed to settle out of court for Rs 8.2 crore.

US-based communications company Avaya has moved the National Company Law Tribunal (NCLT) against Reliance Communications (RCom) in an attempt to recover dues worth Rs 7.5 crore. Swedish company Ericsson also moved an Indian arbitration court in September 2017 to recover unpaid dues of nearly Rs 11.55 billion. This court has barred the company from selling any assets without permission, effectively putting the deal on hold. RCom has appealed against this order in the Bombay High Court.

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In January, RCom announced the sale of its infrastructure to Reliance Jio, in its attempt to reduce debt in its loss-making business. This involved the sale of over 178,000 kilometres of optic fiber, more than 43,000 cellphone towers and 122.4 MHz of 4G Spectrum in the 800/900/1800/2100 MHz bands for an estimated Rs 24,000 crores.

With the sale, RCom is likely to restructure its business interests. RCom’s new business portfolio comprises Business to Business (B2B) operations namely Global and Indian enterprise, internet data centres (IDC), global submarine cable network and international long distance voice with nearly 40,000 customers.

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