27 February 2019: Bank of Baroda(BoB) has lined up plans to sell its Rs 1,838.16 crore debt in beleaguered Reliance Communications (RCom) through an international auction, and is likely to float a tender for the same shortly, two people aware of the matter said.
Bank of Baroda, it is learnt, has classified its RCom exposure as a non-performing asset ( NPA), and will shortly invite expressions of interest (EoIs) from potential buyers keen to pick up the debt.
These latest overtures come in the aftermath of RCom recently announcing plans to move the insolvency tribunal, seeking bankruptcy protection as its lenders haven’t received any proceeds from its asset monetisation plans over the past 18-odd months.
In a separate development, the Telecom Disputes Settlement & Appellate Tribunal (TDSAT) has asked the telecom department (DoT) to reconsider approval for RCom’s pact to sell spectrum to Reliance Jio, since the liability of past spectrum-related dues, it said, lies purely with the seller (RCom) and not the buyer of airwaves (Jio). The buyer, it said, cannot be held liable until the airwaves trade has actually transpired.
The DoT had refused to clear the spectrum sale after Jio said it won’t be held liable for RCom’s past dues. RCom had, subsequently, sought a clarification from the telecom tribunal on the spectrum trading rules.
RCom is now expected to move Supreme Court to seek enforcement of the telecom tribunal verdict.
A senior DoT official though ruled out a non-objection certificate (NoC) to the spectrum trading deal, on grounds that “all previous guarantees extended by RCom are now infructuous as the Anil Ambani-led telco had announced plans to move NCLT, seeking bankruptcy protection. “We are not giving any NOC until there is more clarity,” the official said.
Meanwhile, in so far as auctioning its RCom debt goes, Bank of Baroda, is likely to rely on global auction pricing trends, where the existing debt by a bank is benchmarked to the value of existing bonds or other money instruments in play in the overseas market of the borrowing company — in this case, RCom.
RCom has outstanding overseas bonds of $300 million (Rs 2100 crore), in the global market, but since these bonds have a `D’ or `default’ rating, they are likely to be priced at a minimum discount of 75% of the par value.
Accordingly, international bidders lining up for BoB’s RCom debt are likely to quote a bid that is at least 75% discounted in line with the current market value of the Anil Ambani-led company’s overseas bonds.
In such a scenario, Bank of Baroda can hope to get a maximum bid of around Rs 450-460 crore, roughly a fourth of Rs 1,838.16 crore exposure in RCom or even less,” said the second person cited.
At press time, RCom and BoB did not reply to ET’s queries.
Industry experts though said it remains to be seen whether Bank of Baroda will be ready to take such a hefty haircut in case of its RCom exposure.
A person aware said taking a hair-cut might be “the best option for Bank of Baroda,” with no concrete developments on RCom’s asset monetisation ever since the telco entered the strategic debt restructuring (SDR) process in June 2017.