China Development Bank moves NCLT against “insolvent” RCom

28 Nov 2017


China Development Bank has filed a case against Reliance Communications (RCom) under the Insolvency and Bankruptcy Code, becoming the first lender to move court against the debt-laden telecom company.

Reliance Communications (RCom) owes close to $2 billion in syndicated loans to China Development Bank

The bank is reported to have filed the case before the Mumbai bench of the National Company Law Tribunal (NCLT) on 24 November, adding that law firm Trilegal is advising the Chinese lender.

Besides CDB, RCom's equipment and technology suppliers like Ericsson India Ltd and Manipal Tech Ltd have already filed bankruptcy petitions against the telecom company.

Besides, Tech Mahindra Ltd, another vendor had filed a petition before withdrawing it citing settlement talks, according to report.

''The company has not been served any notice of the application filed by China Development Bank with NCLT, as reported in the media,'' said RCom in a notice to stock exchanges. It said that China Development Bank was ''actively participating'' in the joint lenders forum that restructured RCom's debt under the strategic debt restructuring (SDR) rules. SDR allows banks to convert part of their loans into equity and take management control of a debtor. RCom's total debt stood at Rs44,345 crore as of 31 March.

''The Company continues to remain engaged with all Lenders including the China Development Bank and is confident and committed to a full resolution with the support of all the Lenders,'' RCom said in its statement.

In fact, RCom had defaulted on the coupon payment on its 2020 dollar bonds, the first such default by an India company since the insolvency code was passed in May 2016.

China Development Bank's move will force domestic lenders also to set up a committee of creditors and work with insolvency resolution professional to come up with a revival plan.

In June, the company had presented a restructuring plan that involved hiving off and merging its wireless business with Aircel Ltd and selling a majority stake in its tower unit to Brookfield Infrastructure. Under the plan, lenders had given the company a breather on its interest payments till December 2018.

However, the merger with Aircel fell through, and on 20 October, and the company presented a fresh debt repayment plan to its creditors.

The new plan envisaged the company raising Rs27,000 crore through sale of assets, including spectrum, real estate and towers. It said that a further Rs7,000 crore will get reduced after lenders convert this into equity for a 51 per cent stake. Lenders have not approved this plan yet.

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