ALSO READDebt reduction plan: The rise and fall of RCom's mobile business RCom to get out of SDR; finalises Rs 39,000-cr debt resolution plan RCom achieves full resolution; debt to come down by Rs 25,000 cr Lenders get bids for Reliance Communications assets RCom revamp plan recap: Airtel, Jio eye assets; tower deal to be reworked
Reliance Communications Ltd's shares soared for a second straight day on Wednesday after the Indian wireless carrier detailed a plan to cut its hefty debt load but it was not immediately clear if all key creditors were on board.
RCom, as the company is known, announced on Tuesday a plan to slash its debt by Rs 39,000 crore ($6.08 billion) underpinned by the sale of some of its spectrum, tower, fibre and real estate assets for which the company said it has already received some non-binding offers.
Building on an earlier plan announced in October, RCom, which is backed by billionaire businessman Anil Ambani, said the new scheme would involve no write-offs by lenders or bondholders, nor conversion of debt to equity.
The announcement triggered a 32 per cent rally in its shares on Tuesday. On Wednesday, the shares soared a further 35 per cent. RCom's bond gains, though, were muted with the 6.5 per cent bonds due 2020 up only slightly on Wednesday at 38.5/39.5 cents on the dollar from the previous day.
RCom had a net debt of Rs 45,000 crore at the end of October, putting it among India's most indebted companies. Rising competition, including the entry of start-up Jio - backed by Anil Ambani's brother Mukesh - has trimmed margins in India's telecom sector to wafer-thin levels.
RCom had unveiled plans earlier this year to reduce debt but they came undone as asset sales failed to materialise. Pressure on the firm rose after it missed debt payments and some creditors such as China Development Bank (CDB) initiated insolvency proceedings.
Whether the new plan succeeds will depend on creditors and bondholders signing off on it. Foreign lenders have supported the plan, Ambani said on Tuesday, though he did not say whether CDB had backed the plan.
CDB did not immediately respond to a Reuters request for comment. China's ICBC and Exim Bank, both of whom are lenders to RCom, declined to comment on whether they are on board with the new RCom plan. Sources had told Reuters this month the two lenders were planning to support CDB in its insolvency petition.
Major domestic creditors of RCom were not immediately reachable for comment.
The Indian unit of Swedish telecom equipment maker Ericsson, which has filed an insolvency case to recover dues totalling Rs 1,155 crore ($180 million) from RCom and two of its units, has not been approached by RCom about its latest plan, a source close to the company said, adding it would not withdraw its case.
"RCom has not approached us. Unless we have something concrete on the table from RCom, we will not withdraw the petition," said the source, who did not want to be named as they are directly related to the matter and not authorised to speak to the media. The case is up for hearing on January 5.
An email sent to Ericsson on Tuesday did not elicit a response.