Anil Ambani-led Reliance Communications said that its lenders have on Friday constituted a Joint Lenders’ Forum (JLF) to consider giving the telco time of 7 months until December 2017 to complete the strategic transactions with Aircel and Brookfield that will immediately reduce debt from Rs 45,000 crore to around Rs 20,000 crore, a reduction of 60% or Rs 25,000 crore.
The company has reportedly fallen behind on its loan servicing obligations with more than 10 local banks. The telco earlier this week had said that it will be making payment and prepayment worth Rs 25,000 crore on or before September 30, 2017.
The company said that the lenders have taken note of the advanced stage of implementation of RCOM’s strategic transformation programme involving inter alia the transactions for the Wireless and Towers Business.
RCom said that it will also present to the lenders it’s sustainable long-term plans for servicing the remaining debt of Rs 20,000 crore.
“There will be a standstill on the company’s debt servicing obligations for the next 7 months till end December 2017. In the event the transactions are not completed in the above timeframe, the Lenders may exercise their right to convert their debt, in accordance with applicable SDR guidelines,” the company said in a statement.
This, however, is subject to lenders’ formal approvals and all other approvals as may be necessary under law, it said.
RCom said that it has been engaged in discussions with its lenders to finalise an overall debt resolution plan, with the objective of expeditiously closing the already announced strategic transactions with Aircel and Brookfield, and developing a sustainable long-term plan for servicing the company’s remaining debt.
Rating agency Fitch on Thursday downgraded Reliance Communications’ debt due to the company’s poor liquidity, excessive refinancing risk and a compromised business model, and said that default is a “real possibility”. Other agencies had also downgraded the company’s debt rating. This comes amid concerns over the telecom operator’s loan repayment capability.