Reliance Communications defaulted on a $1.78-billion loan it took from China Development Bank.
According to the Insolvency and Bankruptcy Code (IBC), once a company is referred to the NCLT and if the court finds merit in the petition, then the court appoints a resolution professional and suspends the firm’s board of directors. The resolution professional then calls for bids for the company’s assets. Deloitte and Alvarez & Marsal are vying to become the insolvency resolution professional for RCom.
In a late evening statement, the company said they have not received any communication either from the China Development Bank or the NCLT as yet. “The company is engaged through the JLF with all its lenders for a successful resolution of the strategic debt restructuring (SDR) process. The China Development Bank has also been actively participating in the JLF. The company is, therefore, surprised by the untimely and premature action of the China Development Bank of filing an application at NCLT. The company continues to remain engaged with all lenders including the China Development Bank and is confident and committed to a full resolution with the support of all the lenders.”
The China Development Bank had earlier moved a petition against the RCom-Aircel merger in May to seek a road map from the company on how it would settle its loans. As the RCom-Aircel merger fell through, RCom had to withdraw the merger petition from the NCLT.
On June 13, the Reserve Bank of India had sent 12 large borrowers to the NCLT under the IBC for resolution.
But before that – on June 2 – RCom had won a reprieve from the Indian lenders, led by the State Bank of India, under a SDR plan. Under that, the firm’s principal and interest dues were frozen till December 2018. The SDR plan was based on the RCom-Aircel merger and sale of telecom towers to Brookfield for Rs 11,000 crore. But as both the transactions failed to materialise, RCom had to shut down its wireless telephony services by October.
The Indian lenders and RCom are currently negotiating the rate at which RCom’s debt would be converted into equity. While lenders say they would take into account the current market price for debt conversion, RCom is insisting that the debt conversion should be at the rate of Rs 24.71 a share, as decided on June 2 – the reference date of the SDR.
By arrangement with Business Standard.