Reliance Communications Extends Gain on Asset Sale SignalsBy and
Ambani signals asset sales big enough to end restructuring
Spectrum, fiber network, towers included in disposals
Reliance Communications Ltd. shares extended gains in Mumbai trading after the embattled telephone carrier said Tuesday it was in the final stages of selling some assets to exit a debt restructuring program and cut borrowings by $6 billion.
The stock surged as much as 39 percent to 29.95 rupees before settling at 28.70 rupees as of 3:40 p.m. local time. The shares have more than doubled in the past six trading sessions amid speculation billionaire Anil Ambani, who controls the company, had obtained agreements to sell enough assets to fend off the insolvency process.
Reliance Communications, also known as RCom, will reduce total debt to 60 billion rupees ($936 million) from 450 billion rupees as of the end of October, Ambani said at a briefing on Tuesday. RCom plans to sell assets including its telecom spectrum, towers, optical fiber network and real estate, with all transactions to close between January and March, the company said.
There will be no write-offs or equity conversion for lenders and bond holders, the company said. Ambani did not give details of the sales being discussed.
The announcements Tuesday follow the collapse in October of a merger with Aircel Ltd. and the failure of a planned tower sale to Brookfield Infrastructure Group amid a mobile services price war that hurt profit at the biggest carriers and pushed the smaller ones out of business. RCom is now in the final stages of negotiating definitive agreements for sale of assets, Ambani told reporters.
“All the final binding bids have already been received by the lenders and we expect full and financial closure of all the transactions to be completed between January and March 2018,” Ambani said.
Reliance Communications expects to get about 250 billion rupees from selling its optical fiber network, spectrum across four frequencies and more than 40,000 telecom towers. Another 100 billion rupees will be raised by developing real estate on land it owns in a Mumbai suburb. A stake in the company may be sold to strategic investors.
Creditors including China Development Bank and the Indian unit of network-equipment maker Ericsson AB have sued, seeking to compel repayment by the company. Earlier this month a public-relations firm became the latest to ask an Indian tribunal to place RCom under insolvency proceedings after it failed to pay dues.
The operator expects the insolvency lawsuits to be withdrawn since it has “proposed a full resolution with zero debt write-off, zero equity conversion and substantial prepayment,” Punit Garg, company’s executive director said in a Dec. 27 email.
The company’s proposal has the backing of all banks, including the Chinese lenders, Ambani said on Tuesday.
“This is monetization, not liquidation and we are running a transparent process,” Ambani said. “Bidders can bid for different frequencies in different circles.” He also said that on completion of the deals Rcom will have an enterprise value of 150 billion rupees. That compares with the current enterprise value of about 373 billion rupees, according to data compiled by Bloomberg.
Rcom said it plans to keep its enterprise business in India and its international long-distance operations.
The carrier posted its first annual loss last March after Anil Ambani’s elder brother Mukesh Ambani, India’s richest person, stormed into the market by offering free calls and data with Reliance Jio Infocomm Ltd. That escalated a price war that has forced consolidation in the sector.
Reliance Communications had till this month to make progress on asset sales, or see debts converted to 51 percent of the company’s equity under India’s restructuring rules. It had defaulted last month on a dollar bond due in 2020, sending its shares and bonds to record lows.