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Indian lenders said they would take the current market price of Reliance Communications shares into account while taking a decision to convert the company’s debt into equity.
The company’s market capitalisation has dropped by over 17 per cent since the strategic debt restructuring (SDR) scheme was announced on June 2, and this would impact the conversion price, which is likely to change in accordance with the SDR provisions, lenders said.
“The company has made presentations to us, which reflects its intent to resolve the issue. We are interested to see material developments to help resolution of the account and reduce the debt overhang over a period,” an official with a large public sector bank said, requesting not to be named.
On Monday, Reliance Communications (RCom) reworked its restructuring plan announced in June and offered a “zero write-off” plan for banks under which, the company said, it would sell its telecom towers and other assets and banks would then convert their loans worth Rs 7,000 crore into 51 per cent equity. This new conversion of debt plan, lenders said, needed more clarity.
According to the earlier plan, the lenders were to convert their debt into equity shares at the rate of Rs 24.71 a share, taking the effective date of entering the SDR scheme. At this price, the total valuation of the company was Rs 6,150 crore.
However, on Tuesday’s closing, RCom’s shares were trading at Rs 17.15 a share, giving it a total market valuation of Rs 4,269 crore.
The SDR plan and the standstill agreement with banks gave a breather to the company as it was not required to pay any dues till December next year, and in the interim RCom was to sell assets and repay loans worth Rs 45,744 crore.
When contacted, an RCom official said the Rs 7,000-crore debt conversion was arrived at by taking into account all the assets and earnings of the company’s remaining businesses.
While RCom’s lifeline deal for a merger with rival Aircel collapsed on October 1, about four months after it entered into the SDR, its sale of the telecom tower business to Brookfield for Rs 11,000 crore would also need to be reworked as the original deal included Aircel’s assets.
The company also shut its money-losing direct-to-home TV business and also announced that it would stop its 2G consumer mobile business to focus only on high-end 4G services. It has also issued pink slips to over 1,200 employees.
The earlier conversion price was certified by two independent valuers and the price was subject to any change as may be required in compliance with the SDR scheme, the company had told its shareholders in its annual report.
