Aircel Insolvency: NCLT Approves UV ARC’s Rs 6,630-Crore Resolution Plan With Riders

India’s bankrupt cellular operator Aircel Ltd., has finally found a suitor. The Mumbai bench of the National Company Law Tribunal has approved a Rs 6,630-crore resolution plan proposed by UV Asset Reconstruction Company Ltd., which will be primarily funded through zero-coupon optionally convertible debentures.

A two-member bench of the tribunal comprising Rajasekhar VK and Ravikumar Duraiswamy observed that UV ARC’s plan appeared to be for “winding up or liquidation” instead of being a resolution plan as it has a lot of uncertainties. Still, the tribunal granted its approval stating that it was bound by the Supreme Court’s decision that prevents it from interfering into the merits of the commercial decision taken by the creditors’ committee.

Aircel, along with its two other group entities—Aircel Cellular Ltd., and Dishnet Wireless Ltd.—had filed for voluntary insolvency in February 2018 citing liquidity concerns and inability to service debt. The NCLT had admitted the plea and appointed Deloitte’s Vijaykumar Iyer as the resolution professional in March 2018.

Aircel’s committee of creditors comprised 12 lenders, including four foreign banks and domestic banks led by State Bank of India. Its resolution professional had collectively admitted an amount of Rs 63,920 crore against claims of Rs. 97,000 crore submitted by the creditors. UV ARC proposed an “all or none” consolidated resolution plan for three Aircel group entities owing to their operational interdependence and common debt structure.

Resolution Plan And Asset Monetisation

Here are the key details of the approved resolution plan...

• UV ARC plans to rebuild Aircel as a low capex business and will hive off monetisable assets.
• Against a total outstanding loan of Rs 58,670 crore towards financial creditors, UV ARC has proposed an amount of Rs 19,600 crore. Out of this, Rs 6,630 crore will be paid by UV ARC through zero-coupon optionally convertible debentures issued in favor of financial creditors. The remaining amount will be converted into 24% equity, issued at a premium to financial creditors.
• Initially, UV ARC will hold 76% while financial creditors will get 24% equity. After a period of five years, financial creditors may get up to 74% equity in the three entities against outstanding debentures if they cannot be paid back through asset monetisation. Existing equity and preference share capital will be extinguished for a nil consideration.
• Payments to employees, operational creditors and resolution costs will be paid in priority to financial creditors or issue of equity shares.
• The plan will also be implemented through available and generated funds worth Rs 750 crore arising from refunds from the Department of Telecommunications and return of guarantees issued in favour of Bharti Airtel Ltd.
• UV ARC, at best, anticipates receipt of Rs 1,500 crore through sale of Aircel’s fiber lines, spectrum usage rights, real estate and other assets subject to regulatory approvals.
• Lastly, the resolution applicants will try to generate funds by passing on unabsorbed depreciation and accumulated losses worth Rs 450 crore and tax receivables of Rs 390 crore.

Modifications To Resolution Plan

The NCLT refused to grant the following reliefs and concessions sought by the resolution applicants:

• Immunity from penalties and liabilities arising from non-compliance for a period of twelve months after the approval of resolution plan.
• Blanket exemption from taxes, levies and surcharge emanating from the plan’s implementation.
• Waiver from stamp duty or fees that will be charged by the Ministry of Corporate Affairs or state governments.

The NCLT also granted an approval for retrenchment of employees to facilitate scaling down of operations as per the resolution plan. However, UV ARC must ensure notices and payments in accordance with the employment agreement, the tribunal said in its order.

Senior counsels Ravi Kadam and Prateek Seksaria appeared for the resolution professional while UV ARC was represented by senior counsel Pradeep Sancheti.