Aircel is likely to enter the Strategic Debt Restructuring (SDR) process after State Bank of India (SBI) agreed to convert the company’s debt to equity, according to a report by The Economic Times.
However, the debt recast will require the approval of the Delhi High Court. SBI, which is the leader of the consortium of lenders to Aircel, was earlier reluctant towards SDR.
The lenders will now pick up shares in the telecom operator to replace their loans and may recover the dues following an eventual sale of assets or of the company itself.
People familiar with the development told the newspaper, “Under the SDR, banks will convert their loans to shares so that Aircel’s cash flow can be used to service what is left.”It remains unclear if the banks will take a majority stake in the telecom operator as the final structure and value is still under discussion.
Ever since Aircel’s talks to merge with Reliance Communications failed in September last year, the company has been considering SDR to reduce its debt. However, its lenders were reluctant because Aircel was embroiled in a corruption suit in the Supreme Court.
The operator had around Rs 15,500 crore of borrowings with an estimated sustainable debt of Rs 5,500 crore, which would entail a recast of Rs 10,000 crore.moneycontrol