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UVARC, RJio preferred bidders for RCom

"The committee of creditors has approved the resolution plans of RCOM and its subsidiaries RTL and RITL with an absolute majority of 100 per cent by the lenders at the COC meeting, as against the mandatory requirement of 66%," the source said.Lenders submitted claims of around Rs 49,000 cr in August of which Rs 33,000 cr estimated to be secured debt.

Last Updated: Mar 04, 2020, 11.53 PM IST
The resolution professional has to submit the plan before the National Company Law Tribunal (NCLT) on Thursday.
MUMBAI: UV Asset Resolution Co Ltd (UVARCL) and Reliance Jio Infocomm (Jio) are set to be declared the preferred bidders for Reliance Communications’ (Rcom) assets after lenders overwhelmingly voted in favour of the resolution plans submitted by these companies, people familiar with the voting which was completed late on Wednesday evening said.

The approval was almost unanimous with a few small financial creditors refraining for voting, people familiar with the process said. As a result the vote was much higher than required 66% of lenders by value. According to the plan approved by lenders RCom and its subsidiary Reliance Telecom Infrastructure Ltd (RTIL), will go to UVARC whereas the tower company Reliance Infratel will go to Reliance Jio for a total consideration of between Rs 20,000 crore to Rs 23,000 crore to be paid over a period of seven years.

“This was the best of the worse offers we had considering everything and nobody had a choice really. Even the Chinese lenders who cornered substantial amount of the debt have voted in favour after we told them there was no other option,” said a senior banking executive.

RJio, UVARC and Deloitte did not reply to a late evening email seeking comment.

Indian banks led by State Bank of India (SBI) voted overwhelmingly in favour of the resolution. Last month some banking executives including the resolution professional had met visited China to convince the Chinese lenders to vote in favour of the plan. The Chinese vote was crucial because lender led by China Development Bank (Rs 9864 crore), Exim Bank of China (Rs 3356 crore) and Industrial and Commercial Bank of China (ICBC) (Rs 1554 crore) had a 32% share in the debt outstanding.

SBI was the largest Indian lender with Rs 4826 crore of admitted claims. It was likely to vote in favour of the plan after the bank’s board had given an in principle approval last week. Other Indian lenders followed SBI’s lead and voted for the plan.

“We needed to get the Chinese lenders or Varde Partners which has bought 7% of the debt to get the votes above the mandatory 66%. Indian lenders did not have enough to get this through. Once the Chinese lenders realised this was the best offer on the table they joined us,” said another banking executive. The electronic voting started on Monday and concluded on Wednesday evening.

The assets of bankrupt telco, which was once led by Anil Ambani and were put up for sale included airwaves in the 850 MHz band in 14 of India’s 22 telecom circles (RCom), about 43,000 telecom towers (Reliance Infratel), some fibre and data centres (Reliance Telecom).

“One reason why the bids are so weak is that Rcom’s technology and spectrum is 2G or 3G which is no longer in demand. They did not have much in the 4G spectrum and that hampered demand. The offers we got were very low with only Rs 5 crore offered by cash upfront by UVARC which itself is a relatively new company with a small capital base but we had no choice,” said third banking executive.

The UVARC also includes a zero coupon bond which is redeemable after seven years depending on the recovery made by UVARC by selling Rcom’s assets. If a recovery is not made within seven years banks have the option convert a part of the debt into equity. Jio had bid Rs 3,600 crore, but only for the tower assets.

The resolution plan will now be presented to the dedicated bankruptcy court for approval. The approach to the NCLT could be made as soon as Friday, bankers said. RCom was the second telco to file for bankruptcy after Aircel which is still awaiting the final go ahead from National Company Law Tribunal. Interestingly UVARCL is also the shortlisted buyer for Aircel.

At the time of filing for bankruptcy, RCom had debt of Rs 46,000 crore, with 53 financial creditors — including local and foreign banks, nonbanking financial companies and funds — laying claims.

Besides banks, operational creditors such as tower companies, equipment vendors and DoT have claimed nearly Rs 30,000 crore in dues, of which over Rs 21,000 crore has been verified.

RCom was forced to shut its wireless operations late 2017, hurt by mounting debt and widening losses amid intense competition in the telecom sector after Jio’s entry in September 2016. It tried to sell its wireless assets, such as spectrum and towers, to Jio, but failed due to a slew of legal cases. This forced the telco to opt for insolvency proceedings under the IBC in May 2019.
(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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