RCom Taps China

Anil Ambani is on a marathon to cross financial hurdles. Ambani's telecom company Reliance Communications (RCom) has secured loans from a clutch of Chinese banks to refinance $1.18 billion worth of outstanding foreign currency convertible bonds (FCCBs) due for redemption on March 1. RCom is also looking to raise $1.5 billion (Rs 7,700 crore) in a Singapore listing of its undersea cable unit — Flag Telecom.

RCom, India's second-largest mobile service provider by subscribers, has a debt of $6.5 billion (Rs 34,000 crore) on its books. It had tried to sell its tower assets for more than a year, but in vain. A deal to sell the assets to GTL Infrastructure fell through at the last moment in September 2010. Recently, RCom held discussions with US buyout giants Carlyle Group and Blackstone Group for the sale of its tower business. Anil's elder brother Mukesh Ambani would look for leasing the towers for Reliance Industries' broadband foray.

The Chinese loan has an extended maturity of seven years and interest cost of about 5 per cent. The refinancing is being funded by ICBC, CDB and EXIM bank. This is not the first time that RCom has tapped the Chinese market. In March last year, RCom got a $1.93-billion Chinese loan for refinancing the $1.33-billion 3G spectrum fees, with the balance for buying equipment from Chinese companies Huawei and ZTE. Group companies Reliance Infra and Reliance Power had also earlier got loans from Chinese banks.

RCom plans to sell 75 per cent of the wholly-owned Flag undersea cable business in April. "An investors' trust will buy the stake," says sources. Deutsche Bank is arranging the sale. Anil is trying to unlock the value of his assets to reduce debt as much as possible.

(This story was published in Businessworld Issue Dated 30-01-2012)