IBC: Lenders Agree To Lose Nearly Everything In Aircel’s Insolvency Resolution
Lenders to insolvent Aircel Ltd. accepted a 99 percent haircut by approving a bid by UV Asset Reconstruction Company, according to two people aware of the details.
The Committee of Creditors accepted the resolution plan by UV ARC that would pay nearly Rs 150 crore to take over the telecom operator and two of its group companies, the people said on the condition of anonymity as the information is not public yet. Aircel, which owes lenders Rs 19,800 crore, is left with few assets of any value, they said.
Aircel’s fate symbolises the troubles of India’s telecom sector that has gone through a turbulent decade. The wireless carrier’s problems began in 2011 when investigative agencies started probing its sale to Maxis Bhd after owner C Sivasankaran alleged he was pressured to sell the operator. The pricing war triggered by Reliance Jio Infocomm Ltd. led to stress, and Aircel agreed to merge with Reliance Communications Ltd. But the deal couldn’t go through because of regulatory uncertainty.
The CoC to Aircel comprises 12 lenders, including four foreign banks—AB Svensk Exportkredit, China Development Bank Corporation, NORDIC Investment Bank and Standard Chartered Bank. The company owes nearly 80 percent of its outstanding loans to domestic banks led by State Bank of India.
UV ARC will continue to operate the remaining businesses owned by Aircel and charge a management fee for it. The revenue, net of this fee, would be paid to lenders, the people quoted earlier said. But lenders don’t expect much in terms of recovery in the future, the people added.
The resolution professional for Aircel, Vijaykumar Iyer, didn't respond to emails and calls. A spokesperson for UV ARC declined to comment.
The plan needs approval of the National Company Law Tribunal before UV ARC can take over Aircel. Last year, the operator approached the Mumbai bench of NCLT for voluntary insolvency proceeding after restructuring efforts failed. The company, along with its subsidiaries Aircel Cellular Ltd. and Dishnet Wireless Ltd. were admitted under the Insolvency and Bankruptcy Code in September last year.
If NCLT doesn’t approve the bid, Aircel will likely head for liquidation, the people quoted earlier said. Then the lenders are unlikely to recover any value from the company.
Why Low Valuation
The reason for the low valuation, the people said, is lack of real assets owned by the company. While it has spectrum allotted under India’s telecom policy, the new owner can’t monetise it since the Department of Telecommunications does not allow trading of airways. The company has already stopped most of its wireless business after surrendering licence in December 2017.
Moreover, Aircel had sold its tower business to GTL Infrastructure Ltd. in 2010 for Rs 8,400 crore. If the company still owned its towers, the resale value could have helped lenders make better recoveries, the people said. Aircel currently has 2,000 towers, too less for any potential investor.
Reliance Jio Infocomm Ltd. and Bharti Airtel Ltd. had shown initial interest in Aircel’s fibre business. But the deal did not materialise as Aircel’s fibre network is too small to generate much value for a buyer.