RCom to exit SDR, reduce debt by Rs. 39,000cr: Ambani
What's the story
Anil Ambani-owned Reliance Communications has announced it would exit the ongoing Strategic Debt Restructuring (SDR) scheme of its lenders by selling its Rs. 25,000cr-worth telecom assets, including towers, spectrum and optical fiber by Mar'18.
Ambani said the "new RCom" would also sell stake to global investors to further reduce its debt.
RCom's plan would bring its Rs 45,000cr debt down by Rs. 39,000cr (87%).
Details
RCom troubled by debt, failed merger, insolvency cases
RCom burdened with a massive Rs. 45,000cr debt has been involved in an SDR scheme. 35 lenders led by State Bank of India had to decide on 28 December if the RCom debt should be converted to equity.
Following RCom's failed merger with Aircel, China Development Bank, Ericsson, and other creditors also filed insolvency cases against the telco over non-payment of dues.
Debt
RCom's debt would shrink to Rs. 6000cr, says Ambani
Anil Ambani said RCom and China Development Bank agreed to an out-of-court settlement for the recovery of $1.78bn (Rs. 11,460cr)
Apart from the $25,000cr-worth telecom assets, RCom plans to monetize Rs. 10,000cr-worth real estate assets and also sell a Rs. 4,000cr-worth minority stake in the residual RCom.
Once the whole process is completed, RCom's debt would decrease from Rs. 45,000cr to Rs. 6,000cr.
Quote
Lenders can't have a better solution: Anil Ambani
Ambani said: "We have had an understanding and an arrangement with all the lenders to ensure a substantial prepayment, the residual debt to be duly addressed and a viable business model for the new RCom with no risk to the banks of conversion, write-offs, etc."
Bids for Assets
Reliance Jio bids for RCom's assets for Rs. 18,000cr: Reports
Ambani said RCom received binding bids from 15 firms for assets; the process would be finalized in Jan-Mar'18.
He didn't name any bidders, but his brother Mukesh's Reliance Jio reportedly put in Rs. 18,000cr-worth bids for telecom assets.
Anil added RCom's agreements with lenders make sure that lenders don't need to write-off or convert debt into equity or be burdened with hard-to-sell assets.
Lenders
How much are the banks going to receive from RCom?
Ambani said that Indian banks, including SBI, Canara Bank, IDBI Bank, and Union Bank, would get Rs. 21,000cr on a pro-rata basis of the Rs. 23,000cr dues. The balance would be repaid later.
Meanwhile, overseas banks like HSBC and Standard Chartered would receive Rs. 14,500cr first; the Rs. 1,500cr dues would be repaid later.
Also, holders of $650mn-worth RCom bonds would receive proportionate payments.
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Moral financing, the key driving force: Ambani
Anil Ambani: "I want to make sure that nobody who deals with us (RCom) should lose any money...it is your name, it is Reliance name which stands for trust and reliability... above all, I firmly believe in protecting the legacy of my father."
Telecom Sector
Never lost hope; will not give up: Ambani
Ambani blamed telecom industry's "hyper-competition" in the telecom industry for RCom's financial woes, adding the competition even forced the "mighty house of the Tatas to gift their business."
He said though many doubted if the telecom company will find any buyers to exit the SDR, he never lost hope.
He added, "I told my lenders every day that I will not give up."
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Hope we never have to face IBC, SDR, S4A: Ambani
Ambani said: "I didn't know what an NCLT process was, what was IBC (Insolvency and Bankruptcy Code) process, what was SDR, what was S4A...I hope as a group, and as RCom, we never ever have to understand, appreciate, analyze or face...any such process."