Reliance Communications Ltd.'s lenders have agreed to a seven-month moratorium on the debt obligations of Indian billionaire Anil Ambani's wireless business, which has been battered by investors questioning the company's creditworthiness.
- Lenders have given Rcom time until December to sell its towers
- Rcom has lost 39 percent of its market value in the past month
- Its stock traded at 20.65 rupees at the close of trading in Mumbai
Lenders have given Reliance Communications, or Rcom, time until December to sell its towers to Canadian asset manager Brookfield Infrastructure Group and merge the wireless business with Aircel Ltd., Chairman Ambani said at a press conference in Mumbai on Friday. The proceeds for these transactions will help the company reduce debt by 60 percent, he said.
"This will be the largest-ever debt reduction by one company in the history of India," Ambani said. The company will create long-term shareholder value and a "conservative debt profile," he said.
Reliance Communications has lost 39 percent of its market value in the past month as local rating firms cut the credit score on the company's rupee-denominated bonds and loans to the lowest level, indicating default or that default is expected soon. The carrier has struggled to retain customers in an increasingly competitive market, particularly after older brother Mukesh's Reliance Jio Infocomm Ltd. started last year with offers of free services.
The Brookfield and Aircel transactions are expected to conclude in September, well before the deadline laid out by lenders, Ambani said on Friday. A joint forum of the company's lenders have taken note of the substantial progress made by Rcom, he said.
His assurances are aimed at soothing rising investor worries, as Fitch said this week that "some kind default is a real possibility." Rcom's stock traded at 20.65 rupees at the close of trading in Mumbai, dropping 16 percent for the week.
Fitch cut the company's long-term foreign and local-currency issuer default ratings to CCC from B+ on June 1. Moody's downgraded Rcom corporate family rating and senior secured bond rating to Caa1 from B2. Local rating firms ICRA Ltd. and CARE Ratings have lowered Rcom's credit rating for rupee debt to D. The company is seeking permission from lenders for the sale of its telecommunications tower assets and an equal merger of its wireless business with rival Aircel, that would allow it to pare debt by 250 billion rupees ($3.9 billion), Gurdeep Singh, co-chief executive officer of Rcom said on an investor call this week. Rcom is in discussions with three Chinese lenders -- China Development Bank, Industrial & Commercial Bank of China and Export-Import Bank of China -- about a waiver on interest payments on loans of about $1 billion until September, people familiar with the matter said June 1, asking not to be identified as they aren't authorized to speak publicly. The company is in talks with four potential buyers to sell a stake in its undersea cable unit GCX Ltd., Debtwire reported, citing a GCX investor call.
--With assistance from Anurag Joshi.To contact the reporter on this story: Bhuma Shrivastava in Mumbai at firstname.lastname@example.org To contact the editors responsible for this story: Young-Sam Cho at email@example.com Candice Zachariahs, Arijit Ghosh