SBI board accepts resolution plan for sale of RCom, subsidiaries

They expect 66 per cent of the votes to be in favour of the resolution during the meeting of the committee of creditors (CoC).
The committee of creditors (CoC), led by State Bank of India, on Wednesday voted unanimously (100 per cent) in favour of selling RCom and its two subsidiaries, and the panel’s resolution involved selling tower assets to Reliance Jio (Jio).

Under law, a resolution requires 66 per cent of the vote. With this move, Jio and Canadian PE fund Brookfield together will become the country’s largest tower operator with Jio as its anchor tenant, racing ahead of Bharti Infratel-Indus Towers, an entity whose merger is being considered.

 
The Jio-Brookfield duo, once the deals gets through, will now have control of over 175,000 towers against the 165,000 towers of the proposed entity. It will also give a big push to Jio in its fibre capacity, which would go up from 450,000 km to 600,000 km after the deal, taking it far ahead of others.

The deal is a steal and less than half of what Brookfield was ready to pay in 2016 as part of an agreement with RCom. At that time the US company had signed a non-binding agreement to buy 51 per cent in the tower business for Rs 11,000 crore. 

Last year, Mukesh Ambani’s Reliance struck a deal to sell its tower business to Brookfield for Rs 25,000 crore through an Invit structure, under which it would remain the anchor tenant for 30 years.

According to sources, under the deal, which was cleared on Wednesday, RCom and Reliance Telecom, which houses spectrum, real estate assets, and the data centre and enterprise business, will be sold for Rs 14,000 crore to Delhi-based UV Asset Reconstruction Company (UVARC), which was the highest bidder.

The tower business, which also include fibre assets, is housed in Reliance Infratel, for which Jio is paying Rs 4,700 crore, which again is the highest bid. 

The bidders have committed that they will pay 30 per cent of the proceeds within 90 days. The resolution professional is expected to file the resolution in the National Company Law Tribunal (NCLT) on Thursday. 

According to banking sources, however, the outstanding dues of the banks stood at Rs 41,000 crore and based on the proceeds, the realisation for the 38 lenders would be a minimum of 35 per cent. However, other sources involved in the deal said it included lenders clawing back the priority payments of Rs 4,300 crore made to Chinese as well as Indian leaders. They pointed out that loans to Chinese lenders would reduce from Rs 12,000 crore to Rs 4,000 crore. Taking this into consideration, they said the realisation of the lenders would be as high as 70 per cent.

UVARC is not new in the telecom sector. It is the highest bidder for Aircel, in which the lenders have taken a hit of more than 99 per cent hit. Currently a substantial portion of the spectrum of around 58.75 MHz in the crucial 800 band is being used by Reliance Jio as part of a spectrum-sharing agreement. 

However, RCom and Reliance Telecom have 188 MHz in various bands such as 900, 1800, and 2100. This could be valuable to telcos looking at more spectrum to power their data revolution. 

Analysts said it would make sense for the asset management company to get into a comprehensive deal with Reliance Jio for the spectrum, data centres, and even real estate as they need these assets. UVARC will also have real estate of 132 acres in Navi Mumbai.

Banking sources, however, say that there are some loose ends up. “The position the Department of Telecommunications will take on spectrum usage is an issue. Also how UVARC will raise the money to pay and also what kind of deals they have in place for further sale has to be watched,” said a banker which is part of the CoC.

How it unfolded

  • The CoC had earlier chosen Reliance Jio and UVARC as highest bidders for the assets of RCom and its subsidiaries
  • The combined bid amount at that time was Rs 21,000 crore 
  • The total claims made by various creditors against the companies were Rs 1.32 trillion
  • The Anil Ambani-run firm went through the insolvency process and was referred to the NCLT in May last year


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