Judges slam RCom lenders as GCX widens search for buyer  

12 March 2019 | Alan Burkitt-Gray

Cover

Two appeal judges in Mumbai have strongly criticised the lenders to Reliance Communications (RCom) for failing to release funds and for blocking the sale of assets.

In particular the judges, sitting as the National Company Law Appellate Tribunal (NCLAT), part of India’s bankruptcy court, hit out at the State Bank of India (SBI). It and other lenders “have failed”, said one of the judges.

The judges asked why legal proceedings should not be started against the Joint Lenders Forum (JLF) for, they said, misleading the tribunal by giving an over-optimistic view of the ease of selling assets.

RCom has a deadline of 19 March, next Tuesday, to pay Ericsson the equivalent of $64 million in debts. The SBI has said it can’t release the funds until all lenders agree.

Meanwhile Bill Barney (pictured), the chairman and CEO of RCom’s international subsea arm Global Cloud Xchange (GCX), has widened the search for a buyer for the unit. Last week he called in Lazard, the investment bank, as a financial adviser “to make sure we look at all the available options”, he told Capacity. Barney is also CEO of RCom. 

Sources late last year indicated that GCX has two bidders, including I Squared Capital, the New York private equity fund that owns HGC Global Communications. It and a consortium of other private equity funds both bid $1.1 billion for GCX, sources confirmed to Capacity last year.

“The buyers are still there,” Barney told Capacity. He indicated that one of the reasons for hiring Lazard was to look for alternatives. “There may be buyers to be flushed out.”

Speaking to Capacity from Hong Kong on Monday afternoon local time he said: “I’ve spent all day talking to people who are interested. There’s huge interest right now. But we’re not out of the woods until we get a signed term sheet.”

One of his urgent priorities is to pay a $350 million bond that falls due on 1 August. Barney said that GCX has “strong results” with good cash flow and EBITDA.

Last week GCX said cash flow in the third quarter of the current financial year was 55% above the same quarter a year ago. EBITDA was 17% up.

“We’re confident,” Barney told Capacity. “But this is GCX. RCom continues to be complicated.”

The judges at the NCLAT hearing yesterday said the lenders “claimed that you would recover around Rs 37,000 crore [$5.3 billion] from sale of assets to Reliance Jio”. They criticised the move to threaten to have RCom chairman Anil Ambani jailed for contempt of court if he failed to pay a personally guaranteed debt. That “will not solve the problem before us”, they said.

The NCLAT resumes its hearing today.