12 July 2019: Reliance Infrastructure and Reliance Power got a respite from lenders, who granted them more time to resolve debt issues, triggering a rise in the shares of the two Anil Ambani-led firms.
R-Infra signed an inter-creditor agreement (ICA) with all its lenders, while the power company announced a debt-restructuring deal with US Exim Bank for its Samalkot project. The two firms have been facing a liquidity crunch that has hurt their ability to repay debt.
The parent Reliance Group is grappling with issues in other affiliates as well, such as Reliance Communications (which is facing insolvency) and Reliance Capital (which is strapped for funds and has seen its credit rating being downgraded).
The deal with lenders buoyed RInfra shares, which rose almost 11 per cent to Rs 51on the BSE on Thursday.
R-Infra shares have traded in the range of Rs 37.30 to Rs 488.50 in the past year. The Reliance Power scrip gained 5.5 per cent to Rs 4.21, having traded in the range of Rs 3.95 to Rs 39.25 in the past 52 weeks, according to BSE data.
RELIEF FOR R-INFRA
The ICA with 16 lenders gives R-Infra 180 days to resolve its debt crisis. Such agreements set the ground rules for resolution of stressed assets when a borrower is unable to repay. “Reliance Infrastructure is confident of implementing its resolution plan well before the 180-day deadline based on advanced progress of its various asset-monetisation initiatives,” the company said in a statement.
R-Infra reported its worst quarterly loss in Q1 of FY19 due to impairments and write-offs, with its auditors adding a disclaimer that they did not have sufficient evidence to determine if the numbers give a “true and fair” view of losses and income. The auditors — BSR & Co and Pathak HD & Associates — raised questions about the company’s ability to continue as a going concern. In view of this and the company’s exposure to cash-strapped RPower, rating agencies have downgraded R-Infra to the lowest grade, indicating an imminent default.
The company plans to monetise assets to raise funds as it aspires to be debt-free by 2020. It has signed an agreement to sell its Delhi-Agra Toll Road project to Cube Highways & Infrastructure for an enterprise value of over Rs 3,600 crore. The deal is expected to conclude by the end of August.
R-Infra is also planning to monetise 700,000 square feet of its commercial property — the Reliance Centre in Mumbai’s Santacruz suburb — by way of long-term lease. ET had reported about this transaction on July 1.
RESPITE FOR R-POWER
US Exim Bank has agreed to amortise R-Power’s repayment schedule into bullet payments and extend the loan maturity to June 2022, from the earlier timeline of 2019-20. It has agreed to maintain the interest rate at 2.65 per cent per annum for the troubled Samalkot project, a company source said.
R-Power had to undertake an impairment in the last quarter of FY19 for the gasbased project that has been rendered defunct due to lack of fuel. At the end of fiscal year 2018-19, US Exim Bank had in principle agreed to restructure the term loan but that was subject to completion of certain conditions by May 31, 2019, which did not happen. The loan has now been classified as a current liability. This had worsened the mismatch between the company’s assets and liabilities.
“With the completion of documentation for recast of Rs 2,430-crore loan, the debt which stood classified as ‘current’ will now become ‘non-current’, eliminating the mismatch between current assets and liabilities on this account,” a company spokesperson said.
R-Power has sold one 750 mw unit from the project and is looking to sell two more. The sale proceeds will be used to pare debt.
Reliance Group head Anil Ambani had said on June 11 that the conglomerate was working to meet debt obligations and creating shareholder value, while blaming financial institutions for not extending support. He had also referred to the huge claims stuck in arbitration, and the “most challenging financial environment witnessed in the country in decades” for the group’s woes.