Reliance Comm Loans Said to Be Indicated at Low to Mid 70 Cents

  • Company’s bond and loan prices showing at similar levels
  • Loan price indications emerge after trauma of recent weeks

Prices on three of Reliance Communication Ltd.’s loans totaling $2.33 billion have been indicated in the mid- to low-70 cents on the dollar level, as the Indian telecommunications company’s bond and stock prices tumble while it scrambles to sell its tower business to repay debt. 

Two term loans for $1.33 billion and $925.2 million, plus a $75 million capital spending facility were indicated at this level, according to people familiar with the matter, adding that there have been no trades or offers on this bank debt recently. Reliance Communications’ $300 million 2020 bonds slumped to 71.3 cents Thursday from around 101 cents on May 19, while its stock plunged 38 percent since then to a record low.

“We are surprised that the bank loans are now indicated at similar levels to where the bonds are trading,” said Trung Nguyen, a senior credit analyst at Lucror Analytics in Singapore. “The bank loans are secured over the network and licences, hence severity of loss in a bankruptcy would be significantly less than for the bondholders.”

Reliance Communications, controlled by billionaire Anil Ambani, rattled investors last month with its first full-year net loss as subscribers dwindled due to intensified competition. Its credit rating was cut to ‘restricted default’ by Fitch Ratings Ltd. this week after the wireless carrier presented a proposed debt restructuring plan Friday, and Moody’s Investors Services also downgraded it further into junk territory.

Debt Moratorium

The company’s lenders have agreed to a seven-month moratorium on the debt payments, it said at a press conference in Mumbai Friday. A spokesman for Reliance Communications in New Delhi, contacted on Thursday, referred to the announcement about the loans made last week.

Chairman Ambani said that it’s got until December to sell its towers to Canadian asset manager Brookfield Infrastructure Group and merge the wireless business with Aircel Ltd.

Reliance Communications reported gross debt of 457 billion rupees ($7 billion) as of the end of March, up 2.6 percent from the previous quarter. The Mumbai-based company said that it expects to meet all obligations and has advised lenders it will repay 250 billion rupees on or before Sept. 30 with proceeds from the Aircel and Brookfield transactions.

Even assuming the two deals are completed as planned by the end of next quarter, Moody’s estimated in Tuesday’s report that the company will have more than $3 billion of debt remaining on its balance sheet post-restructuring, and the capital structure of the remaining business will remain weak.

— With assistance by Anurag Joshi

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