RCom Settles Ericsson Row Prompting a Halt on Insolvency Process
(Bloomberg) -- An Indian court halted bankruptcy proceedings ordered two weeks ago for Reliance Communications Ltd., or RCom, after the debt-laden wireless operator and the local unit of Ericsson AB agreed to settle a dispute over unpaid dues. The court also allowed RCom’s lenders to complete a planned asset sale to Reliance Jio Infocomm Ltd.
The National Company Law Appellate Tribunal on Wednesday put a freeze on the 270-day insolvency process that had been triggered by a May 15 court decision and ordered the operator to pay 5.5 billion rupees ($81.5 million) to Ericsson by the end of September. The initial insolvency ruling came in a suit by the vendor against billionaire Anil Ambani’s RCom over dues, which amounted to about 16 billion rupees, Ericsson’s lawyer Arun Kathpalia had said.
The carrier had appealed the lower court order that also drew opposition from creditors including China Development Bank and the State Bank of India.
The latest court order gives the lenders of RCom, with $7 billion in debt, the go-ahead needed to complete a deal to sell its tower, spectrum and fiber assets to Reliance Jio, the upstart wireless operator controlled by Anil’s elder brother Mukesh Ambani. Proceeds of 181 billion rupees from the sale will be repaid to banks, the court said.
RCom on Tuesday had reached a settlement with minority shareholders in Reliance Infratel Ltd. in relation to the sale of tower and fiber assets. Shares of RCom climbed for a fourth day, adding 9.7 percent on Wednesday to close at 17.5 rupees in Mumbai.
The lower court’s insolvency order earlier this month had imperiled RCom’s proposed asset sale because Indian bankruptcy law prohibits “connected persons” from acquiring assets of delinquent borrowers.
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