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RCOM asset sale hits stumbling block; Aircel seeks urgent IRP appointment

6 Mar 2018

An arbitration court has restrained Reliance Communications (RCOM) from selling or transferring any of its assets without its permission, potentially blocking plans agreed by the company and its lenders to reduce its debt burden by the end of March, the Economic Times reports. RCOM had agreed to sell the bulk of its assets to Reliance Jio Infocomm (Jio) for around INR240 billion (USD3.7 billion) as part of an agreement to repay its lenders, but the move has been challenged by Swedish vendor Ericsson, which is attempting to recover dues of around INR10.1 billion from the company. Ericsson claims that the transfer would reduce RCOM to a shell company and prevent the vendor from recovering the money it is owed. The arbitration court noted that Ericsson ‘had made an arguable case’ and ‘would suffer an irretrievable injury’ if it is denied any relief. For its part, RCOM has appealed to the High Court to oppose the order.

The arbitration court is due to hold its next hearing in early June this year, and the delay may cause even more problems for RCOM, with its lenders contemplating taking the firm to the National Company Law Tribunal (NCLT) to begin insolvency and bankruptcy proceedings. Indeed, the China Development Bank, which accounts for more than a third of RCOM’s secured debt, had previously approached the NCLT but withdrew its case after RCOM agreed its asset sale deal with Jio. RCOM was forced to exit the retail mobile market late last year amidst an intense price war and the collapse of its planned three-way merger with Aircel and Sistema Shyam TeleServices Limited (SSTL).

In a related development, meanwhile, similarly-beleaguered cellco Aircel has sought an urgent hearing with the NCLT to appoint an in ‘Interim Resolution Professional (IRP)’ to help resolve issues surrounding continuation of services, repayment of loans and payment of salaries, after filing for bankruptcy last week. The Economic Times cites the senior counsel for the cellco as saying that Aircel’s debts amount to around INR500 billion and that the company has defaulted on interest payments of INR5.8 billion. Aircel owes around INR150 billion to financial creditors and the rest to operational creditors such as tower companies, vendors and other telcos.

India, Aircel, Ericsson, Reliance Communications (RCOM), Reliance Jio Infocomm (Jio), Sistema Shyam TeleServices (SSTL, MTS India)

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