Aircel has entered a strategic debt restructuring (SDR) process after initially reluctant lenders led by State Bank of India agreed to convert debt into equity, people familiar with the matter said. The final contours of the telecom operator’s debt recast will approval from the Delhi High Court.(slightly strange sentence) As per a Delhi High Court order Monday, however, a final restructuring will need to get Court approval.
The banks will now take shares in Aircel to replace their loans and may recover their dues in an eventual sale of assets or of the company, the people said. “Under the SDR, banks will convert their loans to shares so that Aircel’s cash flow can be used to service what is left,” one of the people said.
Since the final structure and value is still under discussion, it is unclear if the banks will take a majority stake in the company.
Aircel has some Rs 15,500 crore of borrowings on its books, with sustainable debt estimated at Rs 5,500 crore, which would entail a recast of Rs 10,000 crore.
ET reported earlier that Aircel’s parent, Malaysia’s Maxis Bhd led by billionaire Ananda Krishnan, is inclined to infusing up to $500 million (Rs 3,183 crore) towards capital growth of the company in Indian markets where it is among the top three.
Another person said the promoter’s funding is contingent on the SDR loan conversion going through.
Aircel has been trying to invoke SDR to reduce its debt burden since talks to merge with Reliance Communications failed end-September. However, the lenders were reluctant because Aircel was embroiled in a corruption suit in the Supreme Court of India.
Aircel, which is shutting operations in six circles, did not respond to ET’s queries.
ET first reported that Aircel was mulling SDR if merger talks with RCom failed on August 11, 2017.
GTL Infrastructure, a telecom tower company, had moved the Delhi High Court to prevent a recast of Aircel’s debt unless it is paid about Rs 900 crore in dues and penalty for premature termination of leases.
SBI represented in court on Monday that Aircel should be allowed to proceed with the restructuring. The court then allowed the bank to plan the restructuring. But said that any sale or restructuring of Aircel’s assets, cannot go through without prior approval from the Court.
GTL Infrastructure had also asked the court to stop Aircel from surrendering spectrum in the six service areas where it is halting operations. The court didn’t stay the return of the airwaves, said a lawyer involved in the matter.
SBI declined comment. GTL Infra declined comment as the matter is sub judice. The Delhi High Court will hear the matter next on February 8 to decide if GTL Infra’s plea that Aircel should deposit money in court is valid.
Although the telecom war triggered by the entry of Reliance Jio Infocomm in September 2016 has led to the fall of RCom, Tata Teleservices and Telenor, Aircel has held its own. With 87.5 million wireless subscribers, the company had a 7.5% market share across India at the end of November. Since its revenue is largely concentrated in a few key markets, Aircel may return to profitability after discontinuing services in the loss-making regions.
However, to keep its foothold, Aircel needs data services, which it relinquished when it sold its 4G airwaves in eight circles to Bharti Airtel in 2016. “Unless Aircel brings data proposition, it will not be able to grow,” said one person.
The company’s key circles including Tamil Nadu and Jammu & Kashmir make a good fit for a buyer, with many touting Bharti Airtel as the likely suitor. Airtel Chairman Sunil Mittal had previously told ET that the market leader would be a part of conversations regarding the sale of Aircel.economictimes
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