Global Cloud Xchange (GCX), an arm of Anil Ambani-owned debt-laden Reliance Communications Ltd, has voluntarily filed for bankruptcy in the US to get through a pre-packaged debt-for-equity swap restructuring plan.
GCX, which according to Bloomberg owns the world's largest private undersea cable system, approached the insolvency court after it missed payments on $350 million (Rs 2,495.6 crore at current exchange rate) of 7% bonds that matured in the beginning of August.
The restructuring plan involves GCX’s senior secured bondholders becoming company owners and providing new loans to support and grow the business. GCX has also envisaged using the protections and framework of Chapter 11 to undertake a sale process, Reliance Communications informed in a filing to the stock exchanges.
Reliance Communications and its units are already under the Insolvency and Bankruptcy Code (IBC) in India.
The telecom operator and its units -- Reliance Telecom and Reliance Infratel -- have received over Rs 93,000 crore worth of claims from financial and operational creditors.
With effect from June 21, 2019, its affairs, business and assets are being managed by, and the powers of the board of directors
are vested in, the resolution professional, Anish Nanavaty, appointed by the insolvency tribunal.
In its filings in May, Reliance Communications had raised concerns over the erosion of its subsidiary GCX’s value.
“In GCX, an overseas subsidiary of the company, the current liabilities exceed current assets by $331 million," it said.
Lenders fear that GCX filing for bankruptcy could further delay the resolution process for Reliance Communications and the two arms.
Reports suggest that Reliance Communications has received 12-14 expressions of interest for its select assets including spectrum, fibre and towers. Frontrunners to buy the assets are Sunil Mittal-owned Bharti Airtel and Ambani's brother Mukesh's Reliance Jio Infocomm Ltd.
In August 2018, Reliance Communications announced the completion of sale of its wireless spectrum, tower, fibre, media convergence nodes assets and related infrastructure to Jio for an unspecified amount. However, earlier in March this year, Jio called off several deals by a mutual agreement with Reliance Communications.
In a bid to lower its debt, former billionaire Anil Ambani's Reliance Group has planned to raise about Rs 21,700 crore (about $3 billion) by selling assets including road projects and radio stations.
The group's another subsidiary Reliance Naval and Engineering Ltd is on the brink of insolvency proceedings as it is struggling with a cash flow crunch after its orders dried up, at a time when efforts to restructure a pile of debt have been rejected by its lenders.