After Fitch downgrades RCom, banks to discuss debt restructuring
Just days after Fitch downgraded telecom operator Reliance Communications (RCom) saying loan default is a “real possibility”, lenders will meet on Friday to discuss restructuring proposals for the debt-ridden firm.business Updated: Jun 02, 2017 11:09 IST
Just days after Fitch downgraded Anil Ambani-owned Reliance Communications (RCom) saying loan default is a “real possibility”, lenders will meet on Friday to discuss restructuring proposals for the debt-ridden firm.
The restructuring proposals could look at all available recast tools like corporate debt restructuring (CDR), strategic debt restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A), said one banker on condition of anonymity.
Under SDR, banks have the ability to convert part of their debt in a stressed company to 51% equity, allowing them to take operational control and sell the company to a suitable buyer. Under S4A, banks can break up the debt into sustainable and unsustainable halves, allowing deep restructuring in the latter, while the former continues to be serviced.
The latest action by Fitch comes on the heels of a downgrade by other rating agencies such as Moody’s Investors Services, ICRA and CARE, and is expected to add to financial woes of the telecom firm that is straddled with Rs 44,000 crore net debt.
RCom stock has been battered over the last few days amid doubts over the telecom operator’s loan repayment capability.
RCom, however, has been trying to assure investors and lenders that it would repay Rs 25,000 crore before September 30 this year, after the sale of its tower business (to Canada’s Brookfield) and merger of its wireless business with Aircel.
The telco said that it would get Rs 11,000 crore from the tower assets sale. The deal with Aircel would transfer Rs14,000 crore debt to the merged company.
The company, last week, had reported its first annual loss since its inception of Rs 1,283 crore for fiscal ended March 2017, against a net profit of Rs 660 crore in 2015-16.
Its loss during March quarter stood at Rs 948 crore compared to a net profit of Rs 79 crore in year-ago period, hurt by the intense price war unleashed by newcomer Reliance Jio, owned by elder brother and India’s richest man Mukesh Ambani.
(With inputs from Livemint)