Aircel lenders staring at a 30 per cent hit due to regulatory delays

MUMBAI: Aircel's lenders are likely to take a further hit of about 30% on their expected recovery of Rs 6,630 crore with regulatory delays further eroding the value of fibre and spectrum, people familiar with the matter, said. A devaluation of about 10% due to regulatory delays is estimated also for the assets of Reliance Communications (RCom), the second telco to be in the midst of bankruptcy proceedings.
"Increased delays mean corporate insolvency resolution process (CIRP) costs will shoot up. Fibre, spectrum or towers have barely been maintained," said a person aware of the development. “The recovery amount for Aircel will go down by 20-30% at least, and all this is because of the regulatory delays.”

At the time of receiving approval from the dedicated bankruptcy court, the CIRP cost was Rs 298.48 crore, which need to be paid first, even before lenders are paid.

Aircel’s resolution plan is now stuck with the Reserve Bank of India (RBI) with the delay a further blow to Aircel's lenders, who had already agreed to take an 89% haircut on their exposures. Lenders to Aircel and its units Dishnet Wireless and Aircel Cellular, including State Bank of India, Bank of Baroda, Punjab National Bank, China Development Bank Corp. and Canara Bank, were to get Rs 6,630 crore from asset reconstruction firm UVARCL under a resolution plan that received the nod from National Company Law Tribunal (NCLT) in June.

Despite the NCLT nod, the banking regulator rejected UVARCL’s bid on the grounds that ARCs cannot infuse equity in an insolvent company at the resolution stage, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, or Sarfaesi Act. This is in conflict with the Insolvency and Bankruptcy Code (IBC) which specifically permits ARCs registered with RBI to act as resolution applicants and submit resolution plans.

The delay in clearance is also hitting RCom that is likely to have already lost 10% in the expected recovery amount of Rs 12,000 crore-Rs 13,000 crore from spectrum and fibre alone. RCom’s spectrum and fibre assets are also being picked up by UVARCL, as per the panel of creditors’ decision. The entire proceeds of the resolution plan of RCom is about Rs 23,000 crore, which also includes telecom towers valued at about Rs 8000-11,000 crore housed and cleared by the lenders’ panel to be picked up by Reliance Jio.

The once Anil Ambani-led RCom and its units are awaiting nod from NCLT.

Besides the RBI, the two telcos also face another legal battle in appellate court over the right to transfer spectrum without paying statutory dues. DoT has been opposing the transfer of the right to use airwaves, unless statutory dues are paid.

Both these telcos had Deloitte as their resolution professional. Deloitte and UVARCL did not respond to ET's queries.

Aircel went down under a debt of Rs 26,000 crore in 2018, while RCom went bankrupt under a debt of Rs 46,000 crore.