ET: Reliance Communications lenders to seek Rs 580 crore from Ericsson claiming violation of IBC

23 July 2019: Lenders to Reliance Communications (RCom) have decided to send a demand notice to Ericsson, asking the Swedish telecom equipment maker to refund the Rs 580 crore that it received from the erstwhile Anil Ambani-owned telco under a Supreme Court directive, according to people directly aware of the matter. The lenders claim the payment to Ericsson qualifies as a ‘preferential transaction’ under the Insolvency and Bankruptcy Code (IBC).

The decision was taken at a recent meeting of RCom’s committee of creditors, and the consortium of lenders led by SBI is likely to send a formal communication to Ericsson soon, according to two independent sources. RCom was admitted for insolvency proceedings in the National Company Law Tribunal in February.

Lenders may Move Court if Ericsson Refuses

If Ericsson refuses to refund the sum, the lenders may explore legal options, the sources said.

A ‘preferential transaction’ involves a payment to a single creditor or set of creditors ahead of others who are waiting in queue and whose claims rank higher in order of importance as per the IBC.

In this case, Ericsson qualifies as an operational creditor since it provided services to RCom. Hence, the payment to the Swedish company ahead of other secured financial creditors — such as banks — was in violation of the insolvency law, the sources claimed.

A spokesperson for Ericsson said the company had not received any request from RCom’s lenders. A source close to the company said the payment had been received as part of contempt proceedings filed by Ericsson against RCom in the apex court, after the latter refused to honour payments for services rendered to it.

“It is a policy of the bank not to comment upon individual accounts and their treatment,” an SBI spokesperson said in response to ET’s queries.

The Supreme Court had held RCom chairman Anil Ambani and two directors guilty of contempt on February 20 as they had failed to obey the court’s orders to deposit sums claimed by Ericsson. The trio was instructed to make the payment or face a jail term.

RCom eventually made the payment, accompanied by a statement from Anil Ambani thanking his elder brother Mukesh and sister-in-law Nita for their “timely support”. People familiar with the matter said Mukesh Ambani, the chairman of Reliance Industries, had contributed around Rs 480 crore for the Ericsson payment. These people said this was an outright payment by the RIL chairman and not a loan.

Ericsson had been battling RCom in court for over 18 months before it finally got a favourable order and received its dues.

The company had filed an application to take RCom to insolvency proceedings in May last year to recover dues, but agreed to halt the legal action after the telco promised an upfront payment. The assurance was backed by a personal guarantee from Anil Ambani.

Ericsson eventually dragged RCom to the Supreme Court after the latter reneged on its promise. Though RCom had initially opposed Ericsson’s plea to initiate insolvency proceedings against it, the embattled telco eventually withdrew its opposition.

Ericsson later claimed RCom was allowing itself to be subjected to insolvency proceedings to avoid paying it.

Financial creditors have claimed as much as Rs 85,000 crore as dues from RCom and two of its arms — Reliance Telecom and Reliance Infratel — after the companies were admitted for insolvency proceedings.

The parent and the two units collectively house spectrum, domestic fibre assets and telecom towers. RCom had shut its wireless telephony services business last year. Another RCom unit — Bermuda-incorporated Global Cloud Xchange, which houses the undersea cable business — is not part of the insolvency proceedings.

The Economic Times reported

ET: SC dismisses DoT’s plea on RCom spectrum case

2 July 2019: The Supreme Court Tuesday dismissed the telecom department’s petition against a tribunal order that had stated that liabilities of past dues related to spectrum usage charges (SUC) rested only with Reliance Communications (RCom) and not the buyer, which in that case was Reliance Jio.

The SC’s verdict comes on the back of a bitter war fought between RCom, Department of Telecommunications (DoT) and Jio on the spectrum deal which never materialised because of lack of consent from the government. The DoT had wanted the buyer -Jio – to agree that it would be responsible for past liabilities of RCom as well when it buys spectrum from the Anil Ambani-led telco. Jio refused to accept DoT’s terms and the deal fell through, forcing RCom to move into insolvency.

The matter was contested in Telecom Dispute Settlement Appellate Tribunal (TDSAT) and the tribunal in February had said that the liability of past dues related to SUC rested only RCom and asked the government to reconsider its refusal to give a no objection certificate (NOC) to the spectrum sale.

DoT moved SC but its plea was dismissed Tuesday.

However, SC’s judgement today may have little impact on RCom’s spectrum sale since the bankrupt telco under a debt of Rs 46,000 crore is in the insolvency court. The reins of the operator are now in the hands of resolution professional (RP), Deloitte.

“Now we may consider to file another application or see what comes out of the resolution since RCom is in insolvency. All creditors will now have to take a haircut,” said a DoT official, who did not want to be named.

RCom’s spectrum – once valued at Rs 7,300 crore – may find few takers during the insolvency process since bidders may prefer to go for a fresh set from the upcoming spectrum auctions to be held later this year than get embroiled in any legal battles with the DoT.

The Economic Times reported

ET: Gail has opposed the resolution plan because it did not consider the government-owned gas and petrochemical company’s claims.

11 June 2019: A joint resolution plan submitted by JM Financial Asset Reconstruction Co Ltd and Reliance Industries to take over distressed textiles company Alok Industries has hit a roadblock after Gail India, an operational creditor to Alok, challenged the plan before an appellate court.

In a petition filed before the National Company Law Appellate Tribunal (NCLAT) in Delhi on May 27, Gail has opposed the resolution plan because it did not consider the government-owned gas and petrochemical company’s claims, people familiar with the development said. The appellate tribunal will hear the matter on July 16.

The development is likely to further delay the resolution plan for the Mumbai-based fully integrated textile company that was in the Reserve Bank of India’s first list of 12 large corporate debtors to be referred for insolvency proceedings, released in 2017.

“Gail was not in the picture when the resolution plan was finalised,” a banker involved in the process said. “It came in late and has filed a petition to be considered. It has claimed outstanding dues of Rs 506 crore, but the total amount that operational creditors got was just Rs 4.3 crore in the approved plan so it remains to be seen whether Gail gets anything.”

In March, National Company Law Tribunal (NCLT), Ahmedabad had approved the sole JM-RIL joint bid. The bid amount was Rs 5,000 crore, just above the Rs 4,500 crore liquidation value of Alok. The company owes lenders a total of Rs 30,000 crore, which means they are taking a haircut of a whopping 83%.

State-run GAIL India has argued that while submitting the revival plan the resolution applicant didn’t give equal weightage to the operational creditors. Bankers however said the amount of recovery is too small to consider anything for non-financial creditors.

“The resolution plan submitted by the resolution applicant (JM Financial-RIL) is totally silent towards the operational creditors and that is against the spirit of the law,” said one of the persons privy to the development. “Gail has challenged the resolution plan, approved by the National Company Law Tribunal.”

Gail has made Ajay Joshi, resolution professional (RP) of Alok Industries, as one of the respondents of the case. Joshi did not respond to messages on his mobile phone as of press time Monday.

The banker quoted earlier said, “Operational creditors below Rs 3 lakh were accommodated in the plan. GAIL was a large supplier and so it wasn’t on the list.”

Nishant Awana, partner at law firm NMA Law Chambers, who is advising Gail India in the matter, declined to comment since the matter is sub judice.

The Economic Times reported

NIE: SBI seeks more time from NCLT to file reply in Reliance Infratel case

1 June 2019: Public sector lender SBI on Friday sought more time from the NCLT to file reply on Doha Bank’s plea seeking stay on a decision of the committee of creditors (CoC) of Reliance Infratel (RITL).

Doha Bank has argued that the creditors’ panel has considered the claims of lenders of parent firm Reliance Communications on the basis of corporate guarantee of RITL which would reduce its voting share in the CoC.

The bank claimed to be direct lenders and said as a syndicate of four banks, it had lent Rs 1,400 crore to RITL. Doha Bank is against considering lenders having corporate guarantee of RITL as financial creditors as this will marginalise their voting rights to 15 per cent from around 55 per cent currently.

The lenders of Reliance Infratel have invoked bank guarantees of Rs 8,000 crore issued by the company in favour of Reliance Communications. The tribunal asked State Bank of India (SBI) to file reply within seven days and Doha Bank to file a rejoinder in three days.

The advocate for Doha Bank Prateek Saksaria had said the petition should be heard before e-voting in the ongoing CoC, whose main agenda are the appointment of resolution professional, determination of voting rights among others.

According to the RComm’s website, Reliance Infratel’s lenders have claimed Rs 12,687.65 crore, of which Rs 9,665.07 crore has been admitted so far. Claims against RComm stood at Rs 49,193.46 crore and the resolution professional, RBSA Advisors LLP, has admitted Rs 47,038.79 crore. Saksaria said, as a syndicate of four banks, including Doha Bank, are direct lenders and had lent Rs 1,400 crore to RITL, the tower unit of RComm.

After listening to the argument, the National Company Law Tribunal (NCLT) bench comprising of V P Singh and Ravikumar Duraisamy said, the IRP process will continue till the order is passed and so will the CoC meeting.

However, they said, it is to be clarified that if the CoC pass any resolution in the meeting, it will depend on the outcome of this plea. The tribunal has kept the hearing on the matter on June 21. The corporate insolvency resolution process of debt ridden telecom resumed after the appellate tribunal vacated the stay on the CIRP of RCom.

In September 2017, Ericsson had filed a petition in the NCLT’s Mumbai bench seeking liquidation of the telecom operator to recover Rs 1,150 crore that RComm allegedly owes it.

This was accepted by the NCLT over RCom’s failure to pay dues to the tune of Rs 1,500 crore, however, it was later stayed by the National Company Law Appellate Tribunal (NCLAT) as both parties reached a settlement, with RComm agreeing to pay Rs 550 crore to Ericsson by September 30, 2018.

Meanwhile, RComm moved the Supreme Court, seeking an extension of the deadline to pay the amount to Ericsson because of a delay in completion of spectrum sale and other assets, to which the apex court granted it time till December 15, 2018.

After RComm had failed to pay the agreed amount, Ericsson moved the apex court wherein the court ordered Anil Ambani, Reliance Telecom Chairman Satish Seth, and Reliance Infratel Chairperson Chhaya Virani to pay Rs 453 crore within four weeks (March 18, 2019). The Swedish company has been opposed to RComm’s insolvency proceedings as it will then have to return the money it had received.

Under insolvency proceedings, dues of financial creditors are settled first and operational creditors get paid only after that. The NCLAT had observed that in case insolvency proceedings against RComm and two other companies were restarted, Ericsson might have to refund the money.

The New Indian Express reported

ET: SBI in favour of a single Resolution Professional for RCom, subsidiaries

1 June 2019: State Bank of India has made a proposal to appoint a single resolution professional to run the bankruptcy process of Reliance Communications and two of its subsidiaries, people with knowledge of the development said. Chinese lenders to the Anil Ambani-controlled telecom company have, however, objected to the proposal.

SBI made the proposal at a meeting of lenders on Thursday, arguing that it would ensure better coordination during the bankruptcy proceedings of RCom and its Reliance Infratel and Reliance Telecom arms, the people said. This, the state-run bank said, would result in speedier resolution and maximisation of the companies’ value.

Two Chinese banks are said to have opposed the proposal, citing excessive workload if one person were to act as the resolution professional for all three. The National Company Law Tribunal had in May last year approved the appointment of three people as the interim resolution professionals (IRPs) — Pardeep Sethi, Mitali Shah and Manish Kaneria — to manage the insolvency process of RCom and the subsidiaries, though all of them represent a single firm, RBSA Advisors. An IRP can be confirmed as the resolution professional once the committee of creditors convenes and gives its consent.

The lenders also have the right to replace the IRP with a new person. SBI has also proposed to replace RBSA with Deloitte. One person close to the development said the Chinese lenders were likely to object to this proposal as well, though this was not corroborated.

“It is a policy of the bank not to comment upon individual accounts and its treatment”, an SBI spokesperson said in response to ET’s queries. China Development Bank, Export Import Bank of China and Industrial and Commercial Bank of China are among lenders to RCom as well as Reliance Telecom. China Development Bank’s exposure is around Rs 11,000 crore.

ET could not ascertain which of the three had opposed the proposal. “Most of the claims of the Chinese lenders are at the parent company level and they would not like the bankruptcy processes to be run as a single process as this would reduce their voting strength when deciding on common resolution plans for all three companies,” a banker said.

The lenders have decided to subject the proposed appointment of Deloitte to an electronic vote, ET reported on Friday. Several Indian banks are said to be backing the appointment of Deloitte.

The Economic Times reported

ET: IRPs admit Rs 66,000 crore of claims against RCom, arms

31 May 2019: The bankruptcy court appointed interim resolution professionals (IRPs) of Reliance Communications (RCom) and two of its subsidiaries have admitted claims of Rs 66,000 crore, more than three fourths of those filed, against the companies, people in the know said.

Bankruptcy proceedings of RCom, Reliance Telecom and Reliance Infratel formally kicked off on Thursday, with a meeting of the banks that have lent money to them to lay out the timelines for the process and to appoint new resolution professionals.

Banks and other financial institutions have filed total claims of around Rs 85,000 crore against the Anil Ambani-promoted telecom company and its units, the people said.

The lenders do not own any equity shares in RCom, though an initial plan had contemplated them converting part of their debt into a controlling stake. The promoters own 22% of the company as per latest stock exchange filings. The rest is held by public shareholders.

While claims worth Rs 49,000 crore have been filed against RCom that houses spectrum and some parts of the now-defunct mobile telephony business, the second-largest share of claims at Rs 24,000 crore was against Reliance Telecom, which held the GSM operations. Banks have filed claims worth Rs 12,000 crore against Reliance Infratel, the company that houses the telecom tower business of the group.

A large number of claims are still under verification and almost 90% of those against the parent company have been admitted “provisionally”, a person in the know said, implying that those were still subject to legal challenges by the IRPs if not found to be accurate.

Representatives of 15 banks met to discuss the way forward for the bankruptcy process where IRPs from advisory firm RBSA briefed the creditors on the claim processing status.

RBSA did not respond to emailed queries from ET till press time Thursday.

RBSA’s Pardeep Sethi is the IRP for RCom, while its Manish Kaneria and Mitali Shah are managing the bankruptcy proceedings for Reliance Infratel and Reliance Telecom, respectively.

State Bank of India, which has the largest exposure to RCom, has proposed to replace RBSA with Deloitte as the resolution professional, ET had reported in its edition on May 7.

The lenders decided to subject the proposal on Deloitte to an electronic vote, the results of which are likely to be disclosed early next week.

“It is a policy of the bank not to comment upon individual accounts and its treatment,” an SBI spokesperson said in response to ET’s queries.

RCom has had to go down the bankruptcy route after several failed attempts at restructuring the company’s debt and selling assets such as its telecom towers and spectrum.

The company announced through a stock exchange notification on February 4 that it would subject itself to insolvency proceedings at the National Company Law Tribunal (NCLT), as it was unable to pay its debt.

Swedish telecom equipment maker Ericsson had first dragged RCom to NCLT in May last year, on the grounds that the company had not paid Rs 550 crore of dues for equipment supplied to it. RCom initially resisted the insolvency proceedings, but was forced to pay under directions of the Supreme Court.

RCom stopped wireless telephony services to customers in late 2017 and said it would only focus on B2B offerings to reduce costs.

The Economic Times reported

BS: Doha Bank moves law tribunal, seeks stay on decisions of RCom lenders

30 May 2019: In a surprise intervention in the Reliance Communications (RCom) insolvency matter, Doha Bank, which is one of the financial creditors to RCom’s subsidiary Reliance Infratel, has moved the National Company Law Tribunal (NCLT) seeking a stay on the decisions of the meeting of the committee of creditors (CoC) held on Thursday.

Doha Bank has alleged that the corporate bank guarantees given by Reliance Infratel for RCom have been invoked by the banks and this, in turn, has increased Reliance Infratel’s debt significantly.

The invoking of corporate guarantees by banks has resulted in a significant reduction in the voting rights of a syndicate of four banks, including Doha Bank, which together had an exposure of around Rs 1,400 crore in Reliance Infratel. The counsel, appearing on behalf of Doha Bank, said that the four banks earlier had a 55 per cent voting right in the Reliance Infratel CoC. But now, with banks invoking the corporate guarantees, and interim resolution professional accepting the claims, their voting rights have been reduced to 15 per cent. 

Doha Bank also said that the interim resolution professional had admitted the claims of the banks that have invoked such bank guarantees without informing the four syndicate banks. This, it said, marginalises them in the CoC. The matter will be next heard on May 31. Separately, the interim resolution professional filed the progress report on RCom’s corporate insolvency resolution process (CIRP) to the tribunal. In the last hearing, the tribunal had asked the interim resolution professional to submit the progress report of the CIRP and had granted exclusion of 357 days spent in litigation from the CIRP process. 

The CoC meet on Wednesday was supposed to review the claims admitted and appoint a resolution professional. Lenders voted in favour of appointing Deloitte as the resolution professional. RBSA Advisors was the interim resolution professional. 

The CIRP of the debt-ridden telco resumed after the National Company Law Appellate Tribunal (NCLAT) vacated the stay on the CIRP of RCom. 

Operational creditor Ericsson, in September 2017, had originally filed for insolvency proceedings against RCom. This was accepted by the NCLT over RCom’s failure to pay dues to the tune of Rs 1,500 crore. However, insolvency was later stayed by the NCLAT as both parties reached a settlement, with RCom agreeing to pay Rs 550 crore. Meanwhile, RCom moved the Supreme Court, seeking an extension of the deadline to pay the amount to Ericsson because of a delay in completion of spectrum sale and other assets, to which the apex court granted it time till December 15, 2018. After RCom failed to pay, Ericsson moved the SC wherein the court ordered Anil Ambani, Reliance Telecom Chairman Satish Seth, and Reliance Infratel Chairperson Chhaya Virani to pay Rs 453 crore by March 18, or face a jail term of three months. Anil Ambani later paid the amount.

Ericsson has been opposed to RCom’s move of undergoing insolvency proceedings. Under proceedings, dues of financial creditors are settled first and then operational creditors get paid. The NCLAT observed in case proceedings against RCom and two other firms were restarted, Ericsson might have to refund the money.

The Business Standard reported

BQ: Will RCom Go The Aircel Way? No, Say Bankers

30 May 2019: Earlier this month, lenders to insolvent telecom firm Aircel Ltd. agreed to take a 99 percent haircut on the Rs 19,800 crore in loans owed by the firm to banks. They took home a meagre Rs 150 crore shelled out by an asset reconstruction company.

Aircel’s fate, which symbolises the troubles that India’s telecom industry has gone through over a turbulent decade, led to concerns that banks would need to take steep haircuts in the resolution process of other stressed telecom firms. Most notably— Reliance Communications Ltd., which is also being resolved under the Insolvency and Bankruptcy Code.

Lenders, however, say that the extent of losses seen in Aircel are a one-off and will not be repeated with RCom. Banks are confident of reasonably high recoveries from RCom over the next few months, said three senior bankers on condition of anonymity. These bankers, however, are unable to put a number to the expected recoveries given that the RCom insolvency process is at an early stage.

According to these bankers, RCom has reasonably strong assets and could attract bidders including Mukesh Ambani’s Reliance Jio Infocomm Ltd.

RCom had debt of over Rs 36,000 crore as on March 2018. This is likely to have gone up to over Rs 40,000 crore now, the three lenders quoted earlier said. Banks involved in the RCom insolvency include State Bank of India, Bank of Baroda, Yes Bank Ltd., IndusInd Bank Ltd., China Development Bank, Industrial & Commercial Bank of China, and 20 other lenders.

Assets With Realisable Value

RCom’s optical fibre, tower, media convergence nodes and wireless spectrum have high realisable value, according to the bankers quoted above. The company also owns real estate assets across Mumbai, Delhi, Chennai and Kolkata, which can help in improving recoveries.

According to the company’s annual report for 2017-18, it has:

  • Over 122 MHz of 4G spectrum.
  • 43,000 tower assets.
  • 2,80,000 km of optical fibre assets in India, U.S., Europe, Middle East and Asia Pacific region.

The first of the three bankers quoted earlier said that the consortium of lenders is confident that RCom will attract many bidders under the IBC process, since chances of challenging a decision under the code would be difficult. The successful bidder would end up owning the company’s assets without any attached liabilities, since all debt-related issues would be resolved under the IBC, this banker said.

The second banker quoted earlier said that lenders are confident of recovering a “reasonable” portion of their debt exposure, provided there are no major delays in resolving the account. In resolution of large insolvency accounts like Bhushan Power and Steel Ltd., Alok Industries Ltd. and Essar Steel Ltd., banks have faced considerable challenges due to judicial delays, the second banker added.

The BloombergQuint reported

ET: RCom panel of creditors to meet on May 30

29 May 2019: Reliance Communications’ (RCom) Committee of Creditors (CoC) will hold a meeting on Thursday, said the Anil Ambani owned telco.

“Pursuant to Regulation 30 of SESI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) and in accordance with the requirements of sub-clause 16(g) of Clause A of Part A of Schedule III of LODR, we wish to inform you that a meeting of Committee of Creditors will be held on 30th May, 2019,” the operator said in a regulatory statement .

The CoC will be viewing the report submitted by the interim resolution professional (IRP) on claims of dues filed against RCom. The meeting may also see a new IRP getting appointed . ET had earlier reported that SBI is keen to propose Deloitte as the resolution professional for RCom’s debt resolution.

So far the work of an IRP was being done by RBSA Advisors LLP. It had to oversee the insolvency process for RCom and its two units . It will also submit a progress report on the Corporate Insolvency Resolution Process (CIRP) on May 30 to the dedicated bankruptcy court as well.

The telco which renewed its bankruptcy proceedings after staving it off for about a year, may become one of the biggest insolvency cases in India Inc. ET had earlier reported that lenders to RCom are expected to claim dues of up to Rs 90,000 crore, almost double the Rs 46,000 crore debt that the telco has in its books, making it among the highest demanded from companies that have gone for insolvency.

The Economic Times reported

ET: RCom posts a consolidated loss of Rs 7,964 crore

27 May 2019: Reliance Communications (RCom) widened its loss to Rs 7,963 crore for the January to March quarter when compared to the previous quarter where it posted a loss of Rs 340 crore . The Anil Ambani owned telecom operator under the reins of interim resolution professional is unsure if it can continue under the burden of losses and liabilities.

“…since the Company continues to incur loss, current liabilities exceed current assets and Company has defaulted in repayment of borrowings, payment of regulatory and statutory dues, these events indicate that material uncertainty exists that may cast significant doubt on Company’s ability to continue as a going concern,” said the company in a regulatory filing on Monday evening.

The telco had posted a loss of Rs 19827 crore during the same period last year.

RCom which has seen its spectrum trading alliance with Reliance Jio get called off posted a total income of Rs 1089 crore compared to Rs 976 crore when compared on a like to like basis.

The telco has also highlighted its concerns over its subsidiary-GCX Limited and said its value has been eroded. . “In GCX Limited, an overseas subsidiary of the Company, pursuant to 7% Senior Secondary Notes …amounting to $350 million falling due for repayment in the month of August 2019, the current liabilities exceed current assets by $331 million,” said the bankrupt telco in its filing. “This indicates the existence of material uncertainty relating to Going Concern of GCX Limited and its two material subsidiaries which have guaranteed the Notes. In three other overseas subsidiaries entities also, it indicates the existence of material uncertainty as networth has been eroded,” it added.

The telco which renewed its bankruptcy proceedings after staving it off for about a year, may become one of the biggest insolvency cases in India Inc. ET had earlier reported that lenders to RCom are expected to claim dues of up to Rs 90,000 crore, almost double the Rs 46,000 crore debt that the telco has in its books, making it among the highest demanded from companies that have gone for insolvency.

The company and some of its subsidiaries have not provided Interest of Rs 1,183 crore and Rs 4,389 crore for the quarter and year: ended March 31, 2019 respectively and foreign exchange variation aggregating to Rs 303 crore gain and Rs 984 crore loss for the quarter and year ended March 31, 2019 respectively. “Had the Company provided Interest and foreign exchange variation, the Loss would have been higher by Rs 880 crore and Rs 5,373 crore for the quarter and year ended March 31, 2019 respectively,” said the telco. The IRPs appointed for Rcom and its two units will submit a progress report on the Corporate Insolvency Resolution Process (CIRP) by May 30 to the dedicated bankruptcy court.

The Economic Times reported