Barely a month after debt-laden Reliance Communications Ltd scrapped its merger with rival Aircel, China Development Bank (CDB), one of the financial creditors of the Anil Ambani-controlled telecom company, approached the bankruptcy court to recover its dues of around Rs 9,000 crore ($1.7 billion), two people familiar with the development told VCCircle.
Besides the Chinese lender, Swedish telecom major Ericsson India Ltd and technology services firm Manipal Technologies Ltd, who serve as operational lenders to RCom, also approached the National Company Law Tribunal (NCLT). Ericsson is seeking to recover Rs 1,155.50 crore (about $180 million) from the telecom company.
“The case was filed last Friday and the tribunal is expected to hear the matter in the second half of the current week,” said one of the people cited above. “China Development Bank will argue to admit their petition as well as to appoint their nominee Alvarez & Marsal (A&M) India as interim resolution professional,” the person added.
While foreign financial lenders have approached the NCLT to recover dues, most domestic lenders have stayed away. This is because RCom is undergoing a strategic debt restructuring (SDR) scheme; however, this is likely to change due to the failed merger.
“The Chinese lender is seeking two reliefs from the bankruptcy court. First, the tribunal should allow their petition and the second is to appoint A&M as their resolution professional,” said one of the people quoted above. “If the tribunal accepts the argument of China Development Bank then all the domestic lenders will have to join the dispute and they will be part of the committee of creditors,” the person explained.
Law firm Trilegal is advising CDB in the case.
Reliance Communications did not respond to email queries from VCCircle at the time of filing this report.
In October this year, RCom called off its proposed merger with Aircel due to regulatory delays and legal uncertainties. Following the collapse of the merger, Canada’s Brookfield Asset Management also shelved its transaction with RCom. Currently, the company has net debt of around Rs 45,000 crore (about $7 billion). To reduce its debt, RCom was to merge its business with Aircel and sell a stake in its mobile masts arm to a unit of Brookfield. RCom’s deal with the Canadian asset management firm depended on its merger with Aircel.
In January 2012, RCom sought to refinance its outstanding foreign currency convertible bonds (FCCB) worth $1.18 billion (Rs 6,125 crore). The refinance deal involved three Chinese lenders—Industrial and Commercial Bank of China, China Development Bank, and Export Import Bank of China, among others. In March 2011, the embattled telecom company took a loan facility worth Rs 6,000 crore ($1.33 billion at that time) from CDB to refinance spectrum fees. Besides this loan facility, it also signed an additional agreement for Rs 2,700 crore ($600 million then) with CDB for financing imports/domestic expenditure of telecom equipment from Chinese vendors (namely, Huawei and ZTE).