A sigh of relief for Reliance Communications

Reliance Communications (RCom) could heave a sigh of relief after the National Company Law Appellate Tribunal (NCLAT) cleared the decks for the sale of its tower and fiber assets. In short, the NCLAT has vacated the stay of the earlier order on the sale of these assets. Though the execution of the sale of the assets was permitted, the proceeds will be deposited in an escrow account with the leading public sector bank, State Bank of India (SBI).

Final Hearing On 18th

However, the tribunal has reserved the final hearing on April 18 during which it would take up the matter of allocation of proceeds. The latest order comes in the wake of a Supreme Court order clearing the way for the assets sale of RCom, which is part of Anil Ambani group. This included spectrum that is at its disposal. The Supreme Court vacated a stay of a High Court order.

Interestingly, Anil’s elder brother controlled, Reliance Jio Infocomm has evinced interest in the assets of Reliance Communications. Before the separation between the two brothers more than a decade ago, Mukesh Ambani was managing the operations and launched the cheapest mobile service at that point in time. The latest order allows the RCom to sell its real estate and media convergence network assets. Following the tribunal order, the shares of the company added 4.28 percent in the BSE and 3.22 percent in the NSE.

The NCLAT order pointed out that the minority investors’ claim is restricted to approximately Rs. 200 – Rs.300 crores from the proposal sale proceeds. However, the telecom service provider has contested the claims made by such investors. The company has been struggling to sell its assets after its deal to acquire Chennai-based Aircel fell through due to regulatory obstacles.

Earlier on Thursday, Bombay High Court’s order was set aside by a bench consisting of Justices Adarsh Kumar Goel and Rohinton Fali Nariman. The bench also re-confirmed the restriction on the sale of its optical fiber and spectrum assets. Reliance Communications’ plea to set aside the Bombay High Court order was supported by SBI led a consortium of banks. The consortium contended that the sale of assets would enable them to get part of the debts that the company owed them. While the sale is likely to yield Rs.25,000 crores, the company owes about Rs.45,000 crores debt.

Debt Recast

In December, Reliance Group chairman, Anil Ambani, indicated that it was engaged in debt recast for quite some time. He pointed out that it could achieve full resolution of its debt through the monetization of its assets. He promised that there would be no conversion of debt and write off for any bondholder or lender.

Anil Ambani had stated in the past that, “We have achieved a full resolution that involves Reliance Communications exiting strategic debt recast. What we have achieved, in the face of extraordinary challenges, is truly historic and unprecedented in Indian corporate history. RCom debt will reduce by Rs 25,000 crore. The entire monetization process to repay the debt of lenders will be completed by January-March 2018 in a phased manner.”

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