More trouble is brewing for Reliance Communications as reports surface of more Chinese banks pursuing insolvency proceedings against the company, as a local court said it would hear China Development Bank's petition on Dec. 18. News that the National Company Law Tribunal has set a date for the hearings sent Reliance Communications' shares to a new low of 11 rupees each, down over 3 percent in its fourth straight session of decline on the Bombay Stock Exchange.
Reuters quoted sources in reports that said Industrial and Commercial Bank of China and Export-Import Bank of China were planning to back China Development Bank by possibly filing their own separate petitions before the tribunal.
Industrial and Commercial Bank of China, China Development Bank and Export Import Bank of China and some other banks had provided a refinancing facility to Reliance Communications, whose foreign currency convertible bonds worth USD 1.18 billion were due for redemption in March 2012, according to a transcript of an analyst call with the company dated Feb. 10, 2012. The refinancing facility was provided at an interest of about 5 percent and due to mature in seven years.
A two-member bench of the National Company Law Tribunal will hear the cases from China Development Bank and Reliance Communications on Dec. 18. China Development Bank wants to recover around USD 2 billion that it had lent the company in 2010.
Public relations company Fortuna PR became the fifth to file a bankruptcy petition against the company on Tuesday, demanding repayments of around 4.3 million rupees (USD 66,779). The Mumbai bench of the company law tribunal will hear the parties on Dec. 19.
The petitions were mainly triggered by Reliance Communications' failure to finalize a merger with smaller rival Aircel in October. In close succession, China Development Bank, vendor Ericsson, Manipal Technologies and Tech Mahindra had rushed to the National Company Law Tribunal to make claims.
Reliance Communications, though, disputes the Fortuna's claims calling its petition "misconceived, premature and motivated by extraneous considerations."
The telecom company also claims it has the support of the majority of its lenders who have decided to oppose China Development Bank's move "in the admission stage itself" before the tribunal.
The telecom company, which is already under statutory debt restructuring agreed upon by a State Bank of India-led consortium, is trying to repay around USD 2.6 billion through asset
sales, including telecom towers, and another 100 billion rupees from the sale of non-core assets and real estate. Experts said that a sale of its fourth-generation technologies to
existing players such as Bharti Airtel and Reliance Jio Infocomm could offer some reprieve. That hope, though, hinges on whether the spectrum is available in regions where such
telecom companies are not present. - Nikkei