Lenders may take 90% haircut on Aircel dues; ARC offers to pay Rs 2,000 cr

With over Rs 20,000 crore of bank debt, Aircel's dues are far greater than Jet Airways which sits on debt pile of RS 8,500 crore

The lenders of bankrupt wireless telephony firm Aircel are staring at a massive haircut of 90 per cent after they received just one bid from UV Asset Reconstruction Company (ARC). The ARC has made an offer of Rs 2,000 crore to the lenders, against Rs 20,000 crore dues of the company.

Lenders are expected to vote on UV ARC’s proposal in the last week of April. Results are expected by mid-May, said a source close to the development. If the offer is not accepted by banks, the company will go into liquidation, according to the Insolvency and Bankruptcy Code (IBC) norms.

UV ARC is promoted by professionals, with equity participation by six public sector banks and two insurance companies, including Central Bank of India, Bank of Maharashtra, Union Bank of India, Bank of India, United Bank of India, Allahabad Bank, United India Insurance, and National Insurance, according to information posted on its website.

With over Rs 20,000 crore of bank debt led by State Bank of India and Punjab National Bank, Aircel’s dues are far greater than Jet Airways, which has over Rs 8,500 crore of debt.

Unlike Jet, which still has operational fleet, Aircel had shut its wireless services long ago and forfeited its customer base. Yet over a year after the telco went to the National Company Law Tribunal in February 2018 to file for bankruptcy, a resolution to ensure banks recover even part of their money is still awaited. Like several telecom companies, Aircel lost its India business after the Supreme Court cancelled its pan-Indian licence in 2012.

When contacted, Aircel’s resolution professional Vijaykumar V Iyer, partner in Deloitte, declined to comment, citing confidentiality protocols. A spokesperson of UV ARC declined to comment.

As part of the resolution, an attempt was also made to sell the company’s fibre business with leading Indian companies, including Reliance Jio, Bharti Airtel, and private equity fund AION Capital Partners bidding for it.

For this, the resolution professional had invoked the IBC rules, where the resolution professional can sell unencumbered assets of the corporate debtor, other than the ordinary course of business — provided the resolution professional is of the opinion that such a sale will lead to better realisation of value. However, there is a caveat. The book value of all assets sold during the resolution process should not exceed 10 per cent of the “claims admitted by the interim resolution professional”. A bona fide purchaser under this regulation will get a free and marketable title to the assets as received.

Yet Aircel’s fibre business of around 15,000 km is not that sizeable though it has presence in Jammu & Kashmir and the Northeast. Aircel also has around less than 2,000 towers (current valuations are at Rs 25 lakh a tower) and a total of around 85 megahertz of spectrum, most of which is in the 2,100 band. Considering the large availability for spectrum in this band, there will hardly be takers as many players like Telenor (to Aircel) have given spectrum free of cost.

Costly exit

• Lenders to vote on UV ARC proposal by April end

• Aircel assets includes fibre network, towers

• Aircel to receive Rs 750 crore from Airtel

• Aircel to go for liquidation if lenders vote against ARC offer