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China Development Bank Pushes Reliance Communications Closer to the Edge

China Development Bank Pushes Reliance Communications Closer to the Edge

Shares of Reliance Communications slipped ~5% today, falling for the fourth consecutive session, as China Development Bank has reportedly filed an insolvency plea against the company before the National Co Law Tribunal.

The company is therefore, surprised by the untimely and premature action of China Development Bank of filing an application at NCLT, the spokesperson added. The telco in a statement on Monday said that it is engaged through the joint lenders' forum (JLF) with all its lenders for a successful resolution of the strategic debt restructuring (SDR) process.

China Development Bank's move will force domestic lenders also to set up a committee of creditors and work with insolvency resolution professional to come up with a revival plan.

Reliance Communication (RCOM) is a diversified telecom service provider offering wireless, wireline and DTH services.

BSE had sought clarification from Reliance Communications after market hours yesterday with respect to news that China Development Bank has filed an insolvency case against it.

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CDB's investment in RCom began in 2010, when it led a syndicate of Chinese lenders that lent the company $1.93 billion for 10 years, in a deal that coincided with a visit by then-Chinese Premier Wen Jiabao to India.

Lenders are now in the process of selling RCom's assets in a bid to recover some portions of the roughly Rs 45,000-crore debt.

The banks are scheduled to meet this week to discuss their next move, as well as the CDB insolvency plea, according to a senior banker at one of the Indian lenders. Ericsson is seeking to recover $180 million from the company. This has further complicated the situations for RCom.

Shares in RCom closed 3.8 percent down at 12.85 rupees. It also agreed to repay lenders an additional 100 billion rupees ($1.55 billion) through the sale and commercial development of its real estate near Mumbai and in eight other cities. Lenders have not approved this plan yet. Last month, Indian outsourcing company Tech Mahindra filed three similar cases against RCom and three of its units, but earlier this month, it withdrew the petition in favor of an out of court settlement.


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