Reliance Communications’ Lenders Huddle To Discuss Debt
Lenders of Reliance Communications to meet today.
A consortium of 22 lenders with Rs 15,000-crore exposure to Reliance Communications Ltd. will meet in Mumbai on Friday to discuss its future course of action after a third of the telecom operator’s gross debt was downgraded to default by rating agencies.
At least four bankers told BloombergQuint on the condition of anonymity that the lenders are worried about the company’s ability to repay its domestic loans. The telecom operator’s gross debt stood at Rs 45,733 crore at the end of March.
Of the 22 lenders, 17 are public sector banks. The meeting has been called by officials of the State Bank of India (SBI), which has the highest exposure of nearly Rs 2,500 crore to the default-rated debt. Lenders were earlier scheduled to meet next week but SBI called for an urgent meeting on Friday, two of the four bankers quoted above said.
The meeting is likely to focus on the status of Reliance Communications’ debt with each bank and what could be done to protect the account from turning into a non-performing asset (NPA). Banks have classified it under the special mention account (SMA) category, which indicates that the account has delayed repayments by at least 30 days.
Under the Reserve Bank of India’s norms for revitalising stressed assets, if an account has delayed interest payment by more 60 days, it is categorised under SMA-2. As soon as one or more lenders classify the account as SMA-2, banks have to gather under the Joint Lenders’ Forum mechanism and begin drafting a corrective action plan (CAP), according to RBI norms.
Earlier this week, two Indian rating agencies – ICRA and Care Ratings – downgraded the company’s short- and long-term debt to default, while Fitch Ratings warned of a default and Moody’s lowered the company’s rating by a notch.
The company later clarified that while a Rs 375-crore repayment on non-convertible debentures was delayed in February, it did eventually pay back investors.