ET: No IBC and Covid NPAs coming, PSBs may sell Rs 20k-cr bad loans

2 June 2020: An estimated Rs 20,000 crore worth of bad loans from state-run banks are up for sale to asset reconstruction companies as banks prepare for a fire sale due to suspension of the bankruptcy law which has blurred the recovery horizon, said bankers familiar with the development. Many banks are looking to sell large exposures to Reliance Communications, Reliance Naval, Videocon Industries, and Amtek Auto that have been a drag for more than two years, they said asking not to be identified.

Banks are looking to sell these loans to avoid higher provisioning requirements on NCLT accounts as resolution dates get longer due to the government’s decision to suspend the bankruptcy law. These banks are yet to come out with a formal list of loans on sale as back channel talks with asset reconstruction companies are ongoing.

“We are talking to ARCs regarding some of our large exposures, depending on the feedback and interest for these loans we will prepare a final list of bad loans on sale,” said a PSU banker. Finance minister Nirmala Sitharaman last month suspended the application of bankruptcy law for any defaults associated with Covid-19 inflicted pain. The Reserve Bank of India has provided a six-month repayment moratorium, in two stages, that is available till August 31.

Another CEO said that with Covid set to increase their NPA burden, they were looking at selling past bad loans to avoid higher provisioning. “We have made adequate provisions for these loans, depending on the response from ARCs we hope we can take write-back provisions in the upcoming quarters,” he said. In the past too, several banks have sold defaulter loans such as Essar Steel and Bhushan Power and Steel due to delays in bankruptcy proceedings. Axis BankNSE -1.18 % too put up loans worth Rs 435 crore on the block, a big chunk of which was to small and medium enterprises.

Indian banks have been saddled with bad loans of over Rs 9 lakh crore, nearly 9.5% of the banking system loans. This is estimated to rise to 11.5% due to shutdown of businesses. The Covid-19 pandemic has also worsened the backlog of cases at bankruptcy tribunals across the country. At the end of March, the National Company Law Tribunal had admitted 3,774 companies to be tried under the bankruptcy law. Of them, 738 cases had exceeded the 270-day resolution timeline while another 494 cases were being heard for more than 180 days.

Source: The Economic Times

FE: Reliance Communications RP wants status quo to be maintained on spectrum licences

20 September 2019: Deloitte, the resolution professional (RP) to Reliance Communications (RCom), has filed an application in the National Company Law Tribunal seeking a direction to the Department of Telecommunications (DoT) that status quo be maintained on spectrum licences, and that they should not be terminated.

Senior advocate Ravi Kadam, representing the RP, told the tribunal that DoT had allegedly threatened to terminate the spectrum licences held by the company, which according to them were a ‘transferable asset’. He also added that it is the only asset with the company and if the licences were to be terminated, any future resolution plan for the corporate debtor would fail.

Ashish Mehta, the lawyer representing DoT, however, informed the tribunal that it had given a showcause notice to the company in March and no fresh notices had been served to RCom since. The two-member bench of the tribunal has directed the DoT to file a reply within the next seven days and allowed the RP to send a rejoinder within seven days of receiving the reply. The tribunal has adjourned hearing on the matter to September 30.

RCom and DoT have been warring over spectrum for months. Earlier this year, the Supreme Court had upheld an order by the Telecom Dispute Settlement Appellate Tribunal (TDSAT) and rejected a plea by DoT that Reliance Jio Infocomm be held liable for RCom’s earlier debt.

DoT had wanted an undertaking from Jio that it would be responsible for RCom’s past spectrum liabilities before approving the deal with RCom. This was in view of TDSAT’s go-ahead to RCom on its proposed spectrum sale to Jio, which would have helped RCom become debt-free. Jio, however, refused to give an undertaking and the deal subsequently collapsed.

The Financial Express reported

ET: NCLAT asks RCom to approach NCLT for Rs 577 crore refund from Ericsson

18 September 2019: The NCLAT on Wednesday declined RCom’s resolution professional’s plea seeking refund of Rs 577 crore from Swiss firm Ericsson, and directed the RP to approach the Mumbai-bench of NCLT for the same.

Reliance Communications is presently going through the Corporate Insolvency Resolution Process under the supervision of the Mumbai-bench of National Company Law Tribunal.

The RP had filed and interim application with the NCLAT, contending that Ericsson, which is only an operational creditor of the company, should return the money paid by it, as RCom is now under the resolution process.

However, a two-member NCLAT-bench headed by Chairperson Justice S J Mukhopadhaya asked that the RP may raise all arguments for refund of money begfore the NCLT.

It also said that the RP may file appeal before it, in case of adverse order by the NCLT on this issue.

“We are not inclined to take this interim Application…,” said the NCLAT.

RCom had paid a sum of Rs 577 crore to Ericsson India after the Supreme Court had directed it to pay.

In February this year, the apex court held Rcom’s promoter Anil Ambani and two of his top executives guilty of contempt of court for wilfully failing to pay the dues of Ericsson.

On April 30 this year, RCom withdrew the cases, which challenged an NCLT order that allowed insolvency resolution process against the company, from the NCLAT.

RCom in May last year had filed a petition before the NCLAT against the NCLT order on a insolvency plea moved by Ericsson.

The Mumbai-bench of NCLT on May 15, 2018, admitted an insolvency petition filed by Ericsson against RCom and two of its subsidiaries — Reliance Infratel and Reliance Telecom.

The NCLAT on May 30, 2018, had stayed the operations of NCLT orders.

Ericsson India had in September 2017 moved insolvency petitions against RCom, Reliance Telecom, and Reliance Infratel before the NCLT for failing to pay their dues amounting to nearly Rs 1,500 crore.

It is estimated that RCom has been reeling under debt of over Rs 46,000 crore.

The company had chalked out plans to sell assets for about Rs 25,000 crore and use it for clearing debt of around 40 lenders.

RCom was expecting to realise Rs 975 crore from sale of spectrum to Jio which it promised to use paying off dues of Rs 550 crore to Ericsson and Rs 230 crore to settle dues of its minority stakeholder Reliance Infratel.

Reliance Jio, however, declined to take over any past liability of RCom for which the Department of Telecom may raise demand in future.

The Economic Times reported

ET: RCom may approach NCLAT for Rs 577 crore refund from Ericsson

18 September 2019: Reliance Communications is set to approach the appellate tribunal in a bid to get Swedish telecom equipment maker Ericsson to refund Rs 576.77 crore paid by the bankrupt telecom operator, a person familiar with the matter said.

The refund of the money paid on the direction of the Supreme Court is being sought on the grounds that Ericsson should not have got its dues while other creditors and vendors await the proceeds from an impending asset sale under the ongoing insolvency process, the person added.

“Resolution professional Deloitte sent a mail informing that RCom and its units – Reliance Telecom and Reliance Infratel – will head for the appellate tribunal to seek the refund,” the person told ET.

RCom, Deloitte and Ericsson did not respond to ET’s queries.

Deloitte, which oversees RCom’s operations during the insolvency process, had earlier written to Ericsson seeking the refund. Ericsson then contended that the RP had no right to seek a refund of the amount paid under the Supreme Court’s direction.

The Swedish firm wanted to know under what provisions the refund was sought. It asked for copies of the minutes of meetings held by the telco’s committee of creditors, a list of financial and operational creditors who attended the meetings where the refund was discussed, copies of the tribunal order appointing Deloitte as the resolution professional, and any applications filed by financial and operational creditors.

The battle started when Ericsson petitioned for RCom’s bankruptcy in September 2017 over non-payment of dues worth over Rs 1,500 crore. The bankruptcy court – National Company Law Tribunal – admitted the petition but under RCom’s appeal, the National Company Law Appellate Tribunal stayed the order and a settlement was chalked out with Ericsson.

When RCom failed to pay the settlement amount of Rs 550 crore, the matter went to the apex court, after which the telco cleared the dues with interest to Ericsson in March 2019 to save chairman Anil Ambani from being jailed for contempt.

RCom’s operational creditors include tower companies, equipment vendors and the Department of Telecommunications.

The battle may eventually head to the Supreme Court, experts said. Creditors, financial and operational, have claimed some Rs 90,000 crore in dues. Deloitte is trying sell RCom’s assets including spectrum, a fibre optic network, towers and real estate to raise funds to at least partly repay lenders.

The Economic Times reported

BBG: India’s Reliance Communications’ Unit GCX Files for Bankruptcy

16 September 2019: A unit of Reliance Communications Ltd., Anil Ambani’s distressed telecom firm, has filed for bankruptcy protection.

GCX Ltd., which owns the world’s largest private undersea cable system, is the latest company owned by the tycoon to stumble. The former billionaire’s Reliance Communications itself fell back into bankruptcy earlier this year. The move by subsidiary GCX comes after it missed payment on its $350 million of 7% bonds that matured on Aug. 1.

Ambani has been waging a war on debt, and Reliance Group has said that it planned to raise about 217 billion rupees ($3.1 billion) by selling assets from roads to radio stations in a bid to cut borrowings. Read more about that here.

India has been grappling with the world’s worst bad-loan mess, and a deepening shadow-banking crisis and hurdles in bankruptcy rules are set to prolong that struggle.

Reliance Naval & Engineering Ltd., another firm controlled by Ambani, said recently it is facing an acute cash-flow crunch after orders dried up amid efforts to restructure a pile of debt.

GCX said in July that it had reached a forbearance pact with holders that provided additional time to discuss options related to the maturity of its bonds. Moody’s Investors Service cut its rating on the firm to Ca last month, as it considered the missed payment on the $350 million bonds a default.

GCX along with other associates filed for Chapter 11 bankruptcy protection at the Delaware court, according to a court filing.

As reported by Bloomberg

ET: RCom RP can’t demand ₹576-cr refund: Ericsson

5 September 2019: Telecom equipment maker Ericsson has said Reliance Communications’ resolution professional has no right to seek a refund of Rs 576.77 crore paid to the Swedish company under the Supreme Court’s directions.

“Without prejudice to our rights and before we respond to your communication dated 23.08.2019, at the outset, we deny the right of resolution professional to seek refund of the amount paid to Ericsson in furtherance to the orders… passed by the… Supreme Court of India,” Ericsson said in a letter dated September 4.

In the letter, which ET reviewed, Ericsson sought to know under what provisions the refund was sought. It asked for copies of the minutes of meetings held by the telco’s committee of creditors, a list of financial and operational creditors who attended the meetings where the refund was discussed, copies of the tribunal order appointing Deloitte as the resolution professional, and any applications filed by financial and operational creditors.

Ericsson’s legal representative, senior advocate Anil Kher, confirmed the contents of the letter.

Deloitte sought the refund, saying the Swedish company had to be treated at par with other operational creditors and that the insolvency resolution process that Ericsson had initiated against RCom had resumed.

Ericsson petitioned for RCom’s bankruptcy in September 2017 over non-payment of dues worth over Rs 1,500 crore. The bankruptcy court admitted the petition but, under RCom’s appeal, the National Company Law Appellate Tribunal stayed the order and a settlement was chalked out with Ericsson.

However, RCom failed to pay the settlement amount of Rs 550 crore and the matter went to the apex court, under whose direction it was finally settled in March 2019, when the telco paid the amount with interest to Ericsson to save chairman Anil Ambani from being jailed for contempt.

The queue of operational creditors includes tower companies, equipment vendors and the Department of Telecommunications. Ericsson’s stand may force RCom and its units to approach the appellate tribunal. The battle may eventually head to the Supreme Court, experts said.

The Economic Times reported

ET: RCom lenders may get only Rs 10k cr against Rs 49k-cr claims

2 September 2019: The assets of Reliance Communications (RCom) and its two units, including spectrum and towers, are expected to fetch ₹9,000- ₹10,000 crore, people familiar with the matter said, likely leaving financial lenders staring at a steep haircut given their combined claims of over ₹49,000 crore.

“The initial valuation shows that the assets should fetch at least ₹9,000-₹10,000 crore, if the insolvency proceedings complete within the next few months,” said one of the people directly involved. “The value of a telecom firm’s assets, especially spectrum, shrinks with time and all approvals need to come in place for a successful sale.”

In the ongoing insolvency process for RCom and its two units — Reliance Infratel and Reliance Telecom — assets up for sale include airwaves in the 850 MHz band—to be used for 4G — in 14 of India’s 22 telecom circles, about 43,000 telecom towers and some fibre.

Those that have shown interest in the assets include mobile phone operators Reliance Jio and Bharti Airtel; tower firms like ATC Telecom Infrastructure; asset-restructuring firms such as Asset Care & Reconstruction Enterprise Ltd and UV ARC; private equity firm TPG Asia VII SF Pte; and India Infrastructure Fund II.

The companies mentioned above did not respond to ET’s queries while TPG declined to comment.

As many as 53 financial lenders have raised claims of about ₹57,382 crore, of which ₹49,223.88 crore had been verified by RCom’s resolution professional (RP), Deloitte.

Top Indian financial lenders include State Bank of India with a verified exposure of over ₹4,800 crore, Bank of Baroda (over ₹2,500 crore), Syndicate Bank (over ₹1,225 crore) and Punjab National Bank (nearly ₹1,127 crore). Top overseas lenders include China Development Bank (nearly ₹9,900 crore), Exim Bank of China (over ₹3,356 crore) and Standard Chartered Bank (Mumbai and London, over ₹2,100 crore).

Another person said that the resolution professional is trying to wrap up the insolvency proceedings by mid-October.

“We are bound by confidentiality obligations and are unable to comment on client-specific matters,” said a Deloitte spokesperson in response to ET’s queries.

The person added that the companies that have expressed interest have started their due diligence into the assets, but the main stumbling block in way of the successful sale of assets as part of the overall insolvency process remains spectrum, the most valued asset.

Like Aircel, another telco that’s undergoing bankruptcy resolution, RCom is embroiled in a battle with the telecom department over ownership of spectrum in the National Company Law Tribunal (NCLT).

The government wants both telcos to return the airwaves, which it regards as a national asset, since they haven’t been paying fees or dues. The telcos say they bought the spectrum at auction and, since it’s within the validity period, the operators have the right to sell it to another party and repay financial lenders, many of which are state-run entities.

RCom holds the licences for 850 MHz 4G spectrum, which will expire in July 2021. Any delay will see its value drop further. Any order in favour of the Department of Telecommunications (DoT) will hit the asset-sale process, and thus, lenders.

In an earlier deal to sell wireless assets to Reliance Jio, which collapsed last year after it wasn’t cleared by the telecom department over unpaid dues, RCom was supposed to sell the spectrum for ₹7,300 crore.

Besides banks, operational creditors such as tower companies, equipment vendors and DoT are facing losses as well. They have claimed nearly ₹30,000 crore in dues, of which over ₹21,000 crore has been verified. For example, in the case of Aircel, the resolution plan has earmarked just about ₹16.5 crore for hundreds of operational creditors, which had claimed about ₹20,000 crore in dues.

The Economic Times reported

FE: Reliance Communications committee of creditors to meet today

27 August 2019: The committee of creditors (CoC) of Reliance Communications (RCom) will hold their sixth meeting on August 27, according to a BSE notice. Ericsson had dragged RCom to insolvency and bankruptcy proceedings in September 2017 over non-payment of dues of over Rs 1,500 crore. The petition was admitted in the National Company Law Tribunal (NCLT), however, the National Company Law Appellate Tribunal (NCLAT) stayed the insolvency order, after an appeal from RCom and a settlement with Ericsson was chalked out.

On May 16, 2018, the NCLT’s Mumbai bench had admitted Ericsson’s insolvency plea against RCom and two of its arms seeking to recover unpaid dues. However, on May 30, NCLAT granted a conditional stay on insolvency proceedings against these firms.

Later in a hearing in April 2019, NCLAT said that Ericsson may have to refund Rs 578 crore that the Swedish telecom equipment maker has recovered as dues from RCom in case insolvency proceedings are triggered against the debt-ridden firm. FE had reported that hearing the RCom-Ericsson matter, the bench headed by its chairman Justice SJ Mukhopadhaya had said: “Why should one party take the amount and other creditors suffer and why should banks suffer? Why should the Indian economy suffer?”

The NCLAT had said that it would decide on the merits of RCom’s plea to allow an insolvency case against the company. The Supreme Court had, on February 20, held RCom chairman Anil Ambani and two others guilty of contempt for violating its order by not paying dues of Rs 550 crore to Ericsson. The apex court had said they would face a three-year jail term if the company failed to pay up within four weeks.

In May 2019, NCLT, Mumbai, said that any resolutions passed by Reliance Infratel’s CoC are subject to its decision on Doha Bank’s petition against admission of bankers’ claims based on invoked corporate guarantees issued by RITL in favour of Reliance Communications.

NCLT’s Mumbai bench in June 2019 approved appointment of a common resolution professional as part of the corporate insolvency resolution proceedings against Reliance Communications, Reliance Infratel and Reliance Telecom. According to the proceedings, the majority of the committee of creditors across the three companies had independently voted to appoint Anish Niranjan Nanavati as RP to replace the existing interim resolution professionals.

The selection for a common RP was also supported by the rationale that the three companies have integrated business affairs with significant overlap of lenders among the three.

The Financial Express reported

ET: SC stays appellate tribunal’s order in RCom OTSC Case

20 August 2019: The Supreme Court on Monday stayed an appellate tribunal’s order which had stalled the telecom department’s demand for Rs 2,000 crore from Reliance Communications (RCom) as one-time spectrum charges (OTSC), an order which may have wider ramifications for the broader industry.

“Currently, SC has granted an interim stay of the TDSAT judgement. It is subject to the outcome of the full and final hearing of all the operators,” said an RCom official.

This implies that RCom may have to provide bank guarantees worth Rs 2,000 crore, under the Department of Telecommunications (DoT) demands, said lawyers. But RCom said it can’t pay anything since it is in the midst of insolvency proceedings. “Aircel and RCom, both are in the NCLT / IBC, where DoT is an operational creditor, and both the companies are in the moratorium period,” explained the RCom official.

Sources in the DoT also admitted that despite the latest order, it will be difficult to recover the money from RCom, now that it is under insolvency proceedings. The one-time spectrum charges are dues towards payment of market-linked prices for excess spectrum held by a telco and have been a contentious issue between the operators and the government.

The DoT has raised demands against all telcos such as Vodafone Idea and Bharti Airtel, but all such demands have been stayed by the TDSAT. The DoT has also challenged all such orders in the SC, whose latest order on RCom may have a bearing on the OTSC demands against the other telcos, said an industry official.

“OTSC demands are an industry issue and these demands are pending for since 2013,” said the official.

RCom is the second telco to go under insolvency and all its payments are under moratorium till the resolution professional (RP) — Deloitte — completes its asset monetisation.

RCom has Rs 46,000 crore of debt. As many as 39 financial creditors have claimed about Rs 49,193 crore from the company. RCom and its units also have hundreds of operational creditors and DoT is one of them.

The Economic Times reported

LM: Two RCom promoters pledge additional 11.5% stake

17 August 2019: Two promoter entities of Reliance Communications (RCom) have pledged 11.5% more stake in favour of Axis Trustee Services, according to regulatory filings. Reliance Communications Enterprises and Reliance Telecom Infrainvest on August 16 pledged about 11.51% of their holding in Reliance Communications amounting to 31.82 crore shares in favour of Axis Trustee Services acting as security/debenture trustee.

A BSE filing on pledge of RCom shares in favour of Axis Trustee Services showed that fresh pledge of 31.82 crore shares was created on August 16, 2019.

Another filing showed that Reliance Communications Enterprises pledged — in two lots — 8.37% holding with Axis Trustee Services Ltd, while Reliance Telecom Infrainvest too created a fresh pledge on 3.13% holding in its favour.

The LiveMint reported