RCom Resolution Plan: Chinese Banks To Get Nearly A Quarter Of Total Payout
A Reliance Communications Ltd. store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

RCom Resolution Plan: Chinese Banks To Get Nearly A Quarter Of Total Payout

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Chinese banks will get nearly a quarter of the Rs 23,000 crore that winning bidders have offered for Reliance Communications Ltd., clearing about 55 percent of their principal dues.

RCom’s committee of creditors have approved by e-voting a resolution plan submitted by UV Asset Reconstruction Company Ltd., the insolvent firm said in an exchange filing on Wednesday. Resolution plans for RCom subsidiaries—Reliance Telecom Ltd. and Reliance Infratel Ltd.—submitted by UV ARC and a unit of Reliance Jio Infocomm Ltd. were also approved.

The exchange filing, however, did not give financial details, saying that the plans will be submitted to the Mumbai bench of the National Company Law Tribunal for final nod.

According to sources, while UVARCL will get assets of RCom and Reliance Telecom (spectrum) for Rs 14,000 crore, Reliance Jio will get tower and fibre assets of Reliance Infratel for Rs 4,700 crore. "The bidders have committed to pay 30 percent of the proceeds of around Rs 7,500 crore within 90 days," sources said.

After considering a clawback clause, RCom's resolution plan fetched Rs 23,000 crore, sources said, adding that Chinese banks—who are the largest lenders—will receive Rs 5,500 crore and their principal debt would stand reduced to Rs 4,500 crore.

Against the alleged personal guarantee of one debt, the Chinese banks would receive Rs 1,800 crore and their exposure will reduce by 55 percent to Rs 2,200 crore. The Chinese banks—Industrial & Commercial Bank of China Ltd., China Development Bank and the Export-Import Bank of China—had dragged Reliance Group Chairman Anil Ambani to a U.K. court to recover their outstanding.

Sources said the total principal secured debt of all lenders stands at about Rs 33,000 crore.

Deal Details

Under the resolution plan, 38 lenders of the bankrupt telecom firm can recover more than 70 percent of the principal secured debt, sources said. They had submitted claims of about Rs 49,000 crore while filing the RCom insolvency case in August 2019.

In addition, the creditors will claw back the priority payments of Rs 4,300 crore made to Chinese banks (Rs 1,300 crore) and Indian lenders (Rs 3,000 crore).

Reliance Jio and UVARCL were the highest bidders for RCom assets at the CoC meeting held on Jan. 13, 2019. Jio had placed a bid of about Rs 4,700 crore for the tower and fiber assets of Reliance Infratel Ltd. while UVARCL offered to pay Rs 14,000 crore for spectrum, real estate assets, enterprise and data centre businesses held by RCom and Reliance Telecom.

"Loans of Chinese lenders will reduce by nearly 65 percent to around Rs 4,000 crore from around Rs 12,000 crore. This is the highest-ever recovery of dues by financial creditors in the telecom sector,” sources claimed.

According to the Insolvency and Bankruptcy Board of India, lenders recovered 63 percent of their dues in the Bhushan Steel case and 60 percent in the Essar Steel case.

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