Lenders May Restart Resolution Process For RCom's Telecom Business
Lenders to Reliance Communications Ltd. are considering restarting the bidding process for the company's telecom business, after having approved an offer from UV Asset Reconstruction Co. last year, two people with direct knowledge of the matter said, speaking on conditions of anonymity.
This comes as the Reserve Bank of India has held on to its position that ARCs cannot act as resolution applicants under the Insolvency and Bankruptcy Code, the first of the two bankers said. Some lenders to RCom have also questioned the source of UVARCL's funds, the second person quoted above said.
Financial creditors led by State Bank of India had approved an offer from UVARCL in March 2020 for RCom's telecom business. The ARC had offered around Rs 14,000 crore to buy the spectrum, real estate assets, enterprise and data centre businesses of the Anil Ambani-owned company. While the creditors had given their nod, the National Company Law Tribunal is yet to approve the offer.
According to claims admitted by the resolution professional, RCom owes financial creditors more than Rs 50,000 crore.
Queries mailed to SBI and UVARCL on Tuesday did not elicit a response. Anish Nanavaty, the resolution professional for RCom, declined to comment.
In August 2019, the RBI had first written to UVARCL questioning its decision to participate in the bidding process for another bankrupt telecom company Aircel Ltd. The regulator had highlighted that ARCs are not permitted to buy equity in stressed firm, even though it can buy loans from other lenders.
Despite months of discussions with UVARCL, the broader ARC industry and banks, the regulator remains unconvinced about allowing such a transaction to go through.
For a rebid to be initiated, RCom's financial creditors will have to pass a resolution allowing for their last approval to become null and void. At least 66% of the financial creditors must approve such a proposal.
Pending AGR Dues
A fresh bidding process will only be initiated after the Supreme Court decides on a matter related to resolution of bankrupt telecom companies, the people quoted above said. The apex court will decide whether a resolution applicant can sell or transfer spectrum assets of a telecom company, without clearing the Department of Telecommunication's adjusted gross revenue claims.
While the Supreme Court is yet to decide on the matter, it had observed in August 2020 that bankrupt telecom companies not clearing AGR dues was concerning.
Without clearing this issue, a new bidding process for RCom may not fetch buyers.
According to the two people quoted above, the DoT has already declined to renew RCom's telecom license till the AGR dues are repaid. The government has claims worth around Rs 26,000 crore in RCom's case, they said. The Economic Times first reported on Tuesday that the DoT had declined a license renewal to RCom.
To speed up the process, lenders led by SBI have written to the Ministry of Corporate Affairs to intervene in the matter, the first of the two people quoted above said.
Under the IBC, government statutory dues are positioned below creditor payments when a company undergoes liquidation.
Siddharth Srivastava, partner at Khaitan & Co., said that the issue of statutory dues is already settled in law and is unlikely to come in the way of resolving a bankrupt telecom company.
"Why should anyone give more weightage to the claims made by the DoT, as opposed to say the income tax department? There are multiple judgments which state that the statutory dues are to be treated as operational creditor claims and should accordingly be dealt as per provisions of IBC,” Srivastava said.