Banks seek relief measures for stressed telcos under debt restructuring plan

NEW DELHI: Banks have asked the government to refund payments relating to airwaves surrendered by telcos that undergo debt restructuring as well as to cancel future deferred payment liabilities for this spectrum. If accepted, these proposals will benefit companies such as Reliance Communications and Aircel.

In a letter to the telecom secretary, the Indian Banks Association (IBA) has also sought return of bank guarantees that have been provided by such companies, noting that the sector’s liability of Rs 5,80,000 crore was primarily toward banks and spectrum payment obligations. IBA said there had been a 25.5% year on-year drop in adjusted gross revenue (AGR) of the industry in the April-June quarter.

‘Money Can Be Used to Pay Banks’
Revenue and operating margins weren’t enough to meet debt repayment and spectrum payment obligations, added IBA.



The government gets a share of the AGR as annual fees.

“Considering most of the mobile operators undergoing restructuring have borrowed from public sector banks, the government is requested to refund any excess upfront payment for the residual spectrum being surrendered from the upfront payment made in totality during purchase of spectrum/ (or) rescind all future deferred spectrum payment liabilities associated with such spectrum,” Indian Banks’ Association said in a letter to the telecom ministry dated November 29. A copy of the letter was seen by ET.

“This money will be used for repaying the banks which in turn prevent loans from turning into NPA (non-performing asset),” the association added, highlighting that the government had allowed similar facility to state-run carriers BSNL and MTNL in the past. At present, telecom operators are allowed to surrender spectrum to the government, but they don’t get a refund and have to pay the instalments for the balance of the payment tenure of the airwaves. The lenders’ association reasoned that by returning bank guarantees without encashing them, ‘critical working capital’ will be freed up for the troubled carriers, which are selling assets including spectrum to reduce debt on their balance sheets.

Huge Exposure to Telcos
The plea throws light on the difficult situation banks are in. Most of them have exposure to debt-ridden companies like Reliance Communications and Aircel, among others, and have been directed by the Reserve Bank of India to make higher provisions for their exposure toward the sector. Reliance Communications is already undergoing strategic debt restructuring (SDR) for lowering its Rs 45,000 crore debt, while Aircel, with debt of Rs 15,500 crore, is believed to be considering a similar move.

More than 20 banks have lent to RCom. State Bank of India with Rs 2,375 crore has the largest exposure followed by Punjab National Bank (Rs 1,350 crore) and IDBI Bank (Rs 1,230 crore). The telco also has $1billion in loans from Chinese banks, the major one being China Development Bank which has dragged the telco to the insolvency court.

The Anil Ambani-owned company has already defaulted on its debt repayment obligations which has led to ratings agencies Moody’s and Fitch withdrawing their coverage of the telco. It has said it won’t be making any repayments till December 2018 under a standstill pact with its lenders.

While RCom is shutting its wireless operations, Aircel is closing operations in five of its weaker circles, and is in talks with its lenders to restructure its debt. The Malaysia’s Maxis-owned company’s merger deal with RCom fell through in September, a year after it was announced.

The banks have also urged department of telecommunications ( DoT) to grant urgent relief to the sector and accept the proposals of the inter-ministerial group (IMG) “as it’s becoming difficult for mobile operators to survive and to service their debt without the immediate support of the government”.

The IMG has suggested a longer 16-year term for staggered payments for spectrum brought in auctions, instead of present 12 years, and recommended lowering of the interest levied on penalties to around 12% from 14%.