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RCom Lenders Push For Better Deal From Bidders

Lenders to bankrupt Reliance Communications (RCom) are unlikely to agree to the current bids and will push for a better deal with more upfront cash, said people familiar with the matter. The committee of creditors (CoC) is weighing whether to pick up equity in RCom and its two arms or sell the parent and its units separately to extract maximum value, these people said.

Reliance Jio Infocomm, Bharti Airtel, UV Asset Reconstruction Co and private equity firm Varde Partners have bid for either part or all the assets of RCom and its two units — Reliance Telecom Infrastructure, which had licences to provide services in eight regions, and its tower arm Reliance Infratel.

But the bids have offered very little upfront cash or are unworkable in the current form, said bankers. They said UV Asset Reconstruction Co has offered to pay Rs 12,760 crore, staggered over 12 years, with only Rs 5 crore upfront cash for creditors.

Varde Partners, meanwhile, has offered to create a special purpose vehicle for each asset with management fee.

Bharti Airtel’s take-it-or-leave-it offer comes with many riders, and has not enthused the lenders either.

“The bidders think banks are desperate to sell, so they will pay us trash rates. But we know the value of the assets. Our estimates suggest the land and other infrastructure alone could be worth Rs 15,000 crore. We will not agree to the offers currently on the table,” said one of the persons.

Jio has bid Rs 3,600 crore, but wants only the towers. Bankers are hoping this bid could be combined with UV Asset Reconstruction Co’s offer, but at a higher amount.

“There are various ways we could do it (asset sale), but all efforts are to get a better deal. We can consider selling the three companies separately, or UV Asset Reconstruction Co may be asked to increase the upfront cash payment. We have already agreed on a scoring model for the deal that the bidders know about. We could find the best bidder, and then run a Swiss challenge,” said a second person familiar with the discussions.

Discussions are on with Deloitte, the resolution professional for RCom and its two units. The CoC has been meeting every few days to take stock.

Emails sent to Deloitte and RCom remained unanswered as of press time Monday.

“Negotiations are on and the CoC is open to picking an equity stake in the company, especially for bids that do not involve a high upfront payment.

Making high upfront payment may be tough when there are legal tussles, which is why equity is important, in case the assets are sold later at a higher value,” said a person aware of the developments.

A senior executive working with one of the bidders said that besides monetary aspects, the CoC also had queries related to various compliance issues.

The CoC expects to raise at least Rs 14,000 crore from the sale of the telco’s assets, including spectrum, fibre and towers, based on the bids received. At that level, the haircut would be about 70% for financial lenders that have filed claims of Rs 49,000 crore against RCom and its units Reliance Telecom and Reliance Infratel.


Assets put up for sale include airwaves in the 850 MHz band in 14 of India’s 22 telecom circles, about 43,000 telecom towers, some fibre and data centres.

The spectrum is the most valuable asset. The bankruptcy court had, in a separate insolvency proceeding for Aircel, ruled that the CoC can sell airwaves, rejecting a telecom department plea. The government wanted the spectrum to be returned to it due to unpaid dues, saying it was the owner of the airwaves. The department of telecom is expected to challenge the National Company Law Tribunal order soon.

At the time of its bankruptcy filing, RCom had debt of Rs 46,000 crore, making it one of India’s biggest insolvencies. As many as 53 financial creditors, including local and foreign banks, nonbanking financial companies and funds, have claimed Rs 57,382 crore, of which Rs 49,224 crore has been accepted by the resolution professional.

Top Indian financial lenders include State Bank of India (with a verified exposure of over Rs 4,800 crore), followed by Bank of Baroda (Rs 2,500 crore), Syndicate Bank (Rs 1,225 crore) and Punjab National Bank (Rs 1,127 crore). Top overseas lenders include China Development Bank (Rs 9,900 crore), Exim Bank of China (over Rs 3,356 crore) and Standard Chartered Bank (Mumbai and London, Rs 2,100 crore).―Newsfeed

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