India’s Reliance Communications Ltd (BSE 4.75%), which earlier this month defaulted on dollar notes, told bondholders that they would be treated the same as bank lenders in terms of their ability to recover funds, according to Citigroup Inc.

The mobile phone operator controlled by billionaire Anil Ambani, whose failure to pay interest on the dollar notes comes as a high-profile test of India’s new bankruptcy laws, held the call Monday, Citigroup said in a note to clients dated November 28. That came amid news that China Development Bank was said to have asked an Indian tribunal to place the company, also known as RCom, under insolvency proceedings.

“One of the key takeaways for us was the company’s intent to treat the bondholders pari-passu to the other secured lenders,” Citigroup said in the note. One of the triggers for the call was to encourage bondholders to form a committee, it said.

Reliance Communications, once India’s second-largest wireless operator, got to this point after years of ballooning borrowing and over-spending finally caught up with it. Intense price competition has driven down earnings as larger mobile companies such as Bharti Airtel Ltd. and deep-pocketed Reliance Jio Infocomm Ltd. vie for market share. In a sign of investor concerns, the 2020 bonds on which it missed an interest payment are trading at about 35 cents on the dollar.

A Reliance Communications spokesman didn’t immediately reply to an email seeking comment. A Citigroup spokesman said he wasn’t able to add anything further.

 

Source: EconomicTimes