RCom shares, bonds jump after NCLAT halts insolvency proceedings
RComshares have surged nearly 80% in the past two weeks amid rising optimism that the carrier would contest the insolvency order and be able to close the deal to sell airwaves, towers and fiber assets to Jio,Updated: May 31, 2018 14:21 IST
Reliance Communications Ltd. soared in Mumbai trading after it settled a payment dispute with the local unit of Ericsson AB, allowing the debt-laden phone operator to proceed with a planned asset sale to Reliance Jio Infocomm Ltd. and possibly stave off insolvency.
RCom, as the company is known, advanced 5.7% to Rs 18.50 as of 1.13 pm on the BSE, after jumping as much as 20% in early trading on Thursday. Its 6.5% bond maturing in November 2020 rose 5 cents on the dollar to 57.3, according to prices compiled by Bloomberg. That’s the biggest gain in the carrier’s notes since January.
The National Company Law Appellate Tribunal on Wednesday put a freeze on the 270-day insolvency process that had been triggered by a May 15 court decision and ordered RCom to pay the agreed Rs 5.5 billion ($81.5 million) to Ericsson by the end of September. The initial insolvency ruling came in a suit by the vendor against RCom over unpaid bills, which amounted to about Rs16 billion, Ericsson’s lawyer Arun Kathpalia had said.
“RCom shares are rallying because of the relief on the Ericsson settlement,” said Nilesh Rai, founder of investment advisory firm Blue Sapphire Consultants. It may even help the carrier “stave off insolvency for now,” he said.
The shares have surged nearly 80% in the past two weeks amid rising optimism that the carrier would contest the insolvency order and be able to close the deal to sell airwaves, towers and fiber assets to Jio, the wireless operator run by RCom Chairman Anil Ambani’s brother.
On Tuesday, RCom reached a settlement with minority shareholders in Reliance Infratel Ltd. in relation to the sale.
Proceeds of Rs 181 billion from the transaction will be repaid to banks, the appellate tribunal said on Wednesday. The amount paid out can be recalled by future orders of the court, if needed, it said.
RCom’s appeal of the lower court order was supported by its creditors including China Development Bank and the State Bank of India. The lower court’s insolvency order had imperiled RCom’s proposed asset sale because Indian bankruptcy law prohibits “connected persons” from acquiring assets of delinquent borrowers.
RCom reported net loss of Rs 197.8 billion for the March quarter on revenue of Rs 9.49 billion.
First Published: May 31, 2018 14:21 IST