China Development Bank (CDB) has filed an insolvency petition against debt-laden Reliance Communications Ltd. (RCom) under the Insolvency and Bankruptcy Court, reports citing people familiar with the development have said. The Anil Ambani-led telco owes close to $2 billion in syndicated loans to the CDB.
The CDB bank filed the case before the Mumbai bench of the National Company Law Tribunal (NCLT) on November 24.
The move is expected to hurt RCom’s hopes of an out of court settlement with its lenders and could potentially derail the strategic debt restructuring exercise that some banks had undertaken in September this year.
In a statement issued on Monday, RCom said it was ‘surprised’ by what it termed as an ‘untimely and premature action’ on part of CDB.
RCom said it has not been served any notice of the application CDB filed with NCLT so far and maintained that it continues to remain engaged with all lenders including CDB and is confident and committed to a full resolution with the support of all the lenders.
“The Company has not been served any notice of the application filed by China Development Bank with NCLT, as reported in the media,” said RCom in a notice to stock exchanges.
It said that China Development Bank was “actively participating” in the joint lenders forum that restructured RCom’s debt under the strategic debt restructuring (SDR) rules.
SDR allows banks to convert part of their loans into equity and take management control of a debtor.
RCom’s total debt stood at Rs 44,345 crore as of March 31.
The development comes almost two months after RCom called off its proposed merger with rival Aircel and just days after it defaulted on the coupon payment on its 2020 dollar bonds, the first such default by an India company since the insolvency code was passed in May 2016.
If the insolvency petition against RCom is admitted, domestic lenders will be forced to set up a committee of creditors, which will work with an insolvency resolution professional to come up with a revival plan.