Bidders may get RCom assets, including GCX, for less in court sale

04 February 2019 | Alan Burkitt-Gray

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Reliance Communications (RCom) says it wants to see a “strategic monetisation” of Global Cloud Xchange (GCX) and other assets via India’s company court.

RCom says it plans to sell “all telecom infrastructure assets and spectrum” and to monetise all other assets including GCX, data centres and its Indian enterprise business via the National Company Law Tribunal (NCLT).

However it looks as if all the assets of RCom will now be sold off in what is effectively a fire sale. Those assets include GCX, for which RCom had two bids each of $1.1 billion. Now the NCLT might accept a lower bid for the subsea cable company.

Last Friday RCom said it had handed over the future of the company to the NCLT, which is India’s company bankruptcy court. In a weekend follow-up to the statement, RCom’s is claiming that this will be a “similar resolution plan” to that its management had been trying to implement independently.

The difference is that, under NCLT rules, only 66% of lenders need to agree – instead of a full 100%. The RCom board this weekend called the 34% “unreasonable minority lenders”.

RCom believes the NCLT will also be able to circumvent the block put on its spectrum sale to Reliance Jio, an unrelated company, by the government’s Department of Telecommunications (DoT).

Today RCom said that the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has upheld RCom’s petition against the DoT’s desire to impose levies on its spectrum – a small step that does not yet allow RCom to sell its spectrum. TDSAT also directed the DoT to return an RCom bank guarantee of the equivalent of $278 million.

In the long term, though, the move to the NCLT might mean creditors get less than RCom originally hoped for. There are only three significant private-sector companies now in the Indian mobile market – Bharti Airtel, Reliance Jio and Vodafone Idea – plus state-owned BSNL and MTNL, which have less than 10% of the market between them.

In addition to the telecoms assets, the NCLT will also handle the sale of RCom’s real estate, including 30 million square feet (2.8 million square metres) at its Dhirubhai Ambani Knowledge City in Mumbai. The knowledge city is named after the late founder of the Reliance group, part of which – including RCom – he left to his son, Anil Ambani. The other part went to his other son, Mukesh Ambani, head of Reliance Jio.

RCom said its board “expects substantial unsustainable debt and liabilities to stand extinguished under [the] NCLT process”. The board said it will “actively participate” in the process, but will have no voting rights.

The board says it “expresses confidence on [the] future prospects as a going concern under new ownership, post NCLT resolution process”. This is a message that senior executives inside the RCom group have been communicating to Capacity over past weeks, on condition they not be named.

However it is unclear how the RCom will be able to influence the asset sale in the face of the NCLT’s duty to creditors to raise the highest price possible. RCom was actively talking to bidders for GCX in late 2018 with a view to getting final offers; now those bids new bidders will be able to come in, and existing bids will be void.

The board said it “ expects strong support from and requisite approvals of the creditors’ committee, resolution professionals and NCLT in the interest of all stakeholders”.

The NCLT will put its fast-track resolution process into operation – but that means 270 days, putting the expected completion date at the end of October 2019. RCom has been seeking a resolution to its problems since October 2017, when its plans to merge with Aircel collapsed, leaving it with a debt of $6.8 billion.