Reliance Communications (RCom) and Ericsson have hit a new wall in their ongoing negotiations for the recovery of pending dues by the telco. This new hurdle which both the parties are facing has come up because of disagreement regarding the payment timeline. While RCom proposed a period of six months for paying up the dues worth Rs 1,000 crore, the Swedish manufacturer is of the thought that the payment should be made within three months. As per the reports, Anil Ambani himself is leading the negotiations on behalf of the company with officials of Ericsson. The Swedish company is of the view that to wait for six months for the payment would be unreasonable, as the dues could “be recovered within the next three months.”
The Anil Ambani led telco was dragged into NCLT by Ericsson on default of payments by the company. The court established that the grounds on which Ericsson had petitioned were right and thus passed the order to push the telco towards insolvency. This order meant that the telco was restricted from selling its wireless assets to Reliance Jio which involved towers, fibre network and spectrum and amounted to Rs 18,000 crore. If possible, this would further help the telco pare the debt of Rs 46,000 crore.
When ET posed a question to both the parties, there was no response from any one of them. It is also worth remembering that before this hassle, the two sides were on polar ends over the negotiation of an amount too. However, during these perilous times, the telco might get help from a change in the Insolvency and Bankruptcy Code which may be soon implemented by the government.
Under the new change, the government proposed that it would lower the voting threshold for approval of resolution plans to a 66% majority of the lenders from 75% earlier and it would also allow withdrawal of an insolvency application if 90% of the creditors agree. On the basis of this, the government would try to encourage a resolution plan instead of pushing companies towards liquidation, which usually proves to be the final nail in the coffin for the giants.
Manoj Kumar, Partner and head of M&A transactions at Corporate Professionals said “It will be easier to get approval at the committee of creditors (CoC) in all cases including RCom. Another part is, now there will be a possibility of termination of insolvency process with the consent of 90% financial creditors. For instance, RCom can privately negotiate with Jio, and after the deal, promoters may ask for termination of insolvency at CoC.”
Manoj Kumar further added that the CoC only consisted of financial creditors and not operational creditors, which means that there might be a chance of them supporting a deal with Jio if it means cash out for them.
To recall, after Ericsson filed against RCom in NCLT, the telco knocked on the doors of National Company Law Appellate Tribunal asking the bench to set aside the order passed by the NCLT on the grounds that Ericsson was an operational creditor and not a financial one.
Senior Counsel on Ericsson’s half, Anil Kher said “We had filed a caveat in the court and have not received the petition copy yet. The interim resolution professional has sent us the letter that they have sent to the arbitrational tribunal that proceedings there be kept in abeyance.”
Between these discussions, the sharemarket was fast to respond as shares of RCom declined 0.7% to Rs 14.15 at the close on the BSE on Thursday. The settlement amount which was being discussed by both the parties was hovering between Rs 700 to Rs 800 crore. Also, the Swedish manufacturer asked for an undertaking form State Bank of India, one of RCom’s lenders that the bank will pay up the dues in case the telco is unable to do so.
The insolvency tribunal appointed three IRPs from RBSA Restructuring Advisors LLP to run RCom and its two units – Pardeep Kumar Sethi for RCom, Manish D Kaneria for Reliance Infratel and Mitali Shah for Reliance Telecom. The IRPs are given a timeframe of 270 days before which they have to find ways to clear up the dues of the telco.
Lastly, Reliance Communications stated that the talks with Ericsson for resolving the commercial issues were at an “advanced stage”, they also added that they were confident of their deal with Reliance Jio for the selling of wireless assets.