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RCom shares, bonds fall after Ericsson's insolvency petition

Ericsson is seeking a total of Rs 1,155 crore from the company and two of its subsidiaries

Reuters  |  Mumbai 

RComs' shares, bonds fall after Ericsson's insolvency petition

Shares in Ltd extended losses on Thursday, falling nearly 3 per cent, a day after the local arm of Sweden's filed a plea with an insolvency court against

Ericsson, which signed a seven-year deal in 2014 to operate and manage Reliance Communications' nationwide network, is seeking a total of Rs 1,155 crore ($180 million) from the company and two of its subsidiaries.

Reliance Communications, widely known as RCom, reported its third quarterly loss in a row last month and is trying to find ways to cut its debt after lenders gave it a reprieve on loan repayments until the end of 2017.

The company, controlled by Anil Ambani, has been hit by free voice and cut-price data plans offered by the mobile market's newest entrant, Reliance Jio Infocomm, the network operator backed by Ambani's older brother and India's richest man, Mukesh.

bonds also fell in early trade, with its 6.5 percent bonds due 2020 indicated at 55/60 cents on the dollar, down from an earlier 57/62 cents.

"This seems like the first salvo has been fired but is unlikely to push to bankruptcy," said a Hong Kong-based trader.

is protecting its own interests and this could open the door for negotiation later, "but I do expect some selling, particularly from private banking bondholders," the trader said.

The bonds were indicated at 57/60 in late afternoon trading on Thursday, while shares in also pared losses to close 0.9 percent down at Rs 21.55.

shares fell 4 percent on Wednesday after local media reports said had filed an insolvency petition.

DEBT PILE

RCom's net debt stood at 443.45 billion rupees ($6.92 billion) at the end of March. It hopes to reduce that figure by 250 billion rupees by merging its wireless business with rival Aircel and by selling a stake in its mobile masts arm to a unit of Canada's Brookfield Asset Management.

Chairman said earlier this year that the company hopes to close both deals by the end of September.

However, some investors remain pessimistic about the company's prospects and RCom's share price is unlikely to recover until such issues are resolved, said Gaurang Shah, head investment strategist at Geojit Financial Services.

was part of a group that had earlier objected to the RCom-Aircel deal, but India's National Company Law Tribunal (NCLT) ruled in August that had no grounds to object as its claims on amounted to less than 5 percent of the company's total debts.

It is unclear whether the new petition could derail RCom's two pending deals.

could also seek support from Mukesh Ambani's Jio. shares airwaves, towers and fibre with Jio and had said last year the two had already achieved a "virtual merger."

lawyer Janak Dwarkadas was quoted on Thursday by the Economic Times as saying and "are in talks to settle the matter out of court before September 26," when the matter is due to come before the NCLT.

First Published: Thu, September 14 2017. 19:31 IST
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