Reliance Communications (RCOM) has raised a loan of Rs. 61.25 billion from a consortium of Chinese banks to refinance its outstanding foreign currency convertible bonds (FCCBs).
Industrial and Commercial Bank of China , China Development Bank (CDB) and Export Import Bank of China are amongst the lenders which will fund the repayment of FCCBs, due for redemption in the beginning of March 2012. The FCCBs were issued in February 2007, with a conversion price of 654 rupees a share.
As per the lending deal, RCOM will repay the debt in seven years at an interest cost of about 5 percent.
Currently, RCOM doesn’t have adequate cash flows as it has to make interest payments for Rs 300 billion debt that it is carrying on its balance sheet. RCOM paid around Rs 85.85 billion for 3G spectrum in 2010 and took a $1.9-billion loan from CDB to refinance this and purchase 3G equipment. In April 2011, the firm paid out about $500 million to redeem FCCBs issued in 2006.
Further, RCOM?s plans to use the proceeds expected from its tower arm sale, for redeeming these FCCBs, took a serious beating. Though there are reports suggesting that the company has reached a deal with private equity firm Blackstone, a final decision is yet to be made in this regard.
