Wednesday, January 11, 2012

Reliance Communications in loan talks with China's CDB: Source

India's Reliance Communications, which has a $925 million convertible bond maturing in March and has failed so far in efforts to sell its tower unit, is in talks withChina Development Bank for a loan to redeem the bond, a person with direct knowledge of the matter said.

The company, controlled by billionaire Anil Ambani, has been trying for more than a year to sell its tower business in a deal that could be worth more than $3 billion.

Separately, two sources with direct knowledge of the matter said a deal for the towers, which would allow the company to pay down a big chunk of the $6.5 billion in net debt on its books as of the end of September, was not close to completion.

The company has been in talks with US buyout giants Carlyle Group and Blackstone Group on a deal for the towers business, sources have told news agency.

Reliance Communications is looking to secure a leasing agreement for its towers from Reliance Industries, controlled by Anil Ambani's once-estranged brother Mukesh, before pressing forward with a tower sale, the two sources said.

In a statement to Reuters, a Reliance Communications spokesperson said: "RCOM will ensure timely redemption of FCCBs (foreign currency convertible bonds) due in March 2012," but declined further comment.

The company did not immediately respond to a query on the status of the tower sales process.

Reliance Industries, an energy-focused conglomerate that is India's most valuable company, plans to launch nationwide broadband services using fourth-generation (4G) wireless technology.

Reliance Communications is in talks with state-owned China Development Bank for a syndicated loan of $925 million, the same size as the convertible bond, the first source said.

The bank is likely to approach other Chinese lenders about syndicating the loan, the source said.

Terms are still to be worked out, and a loan is not likely to be launched until February, after China's Lunar New Year holiday later this month, this person said.

Reliance Communications, which has borrowed from the Chinese lender in the past, has also discussed with China Development Bank the possibility of borrowing Chinese currency in India, the person said.

Last March, China Development Bank arranged loans worth $1.93 billion, based on exchange rates at the time, for Reliance Communications.



Terms are still to be worked out, and a loan is not likely to be launched until February, after China's Lunar New Year holiday later this month, this person said. Reliance Communications, which has borrowed from the Chinese lender in the past, has also discussed with China Development Bank the possibility of borrowing Chinese currency in India, the person said. 

China Development Bank arranged loans worth $1.93 billion for Reliance Communications last March. The new loan would probably have a wider margin than the 300 basis points above Libor that Reliance Communications paid in last year's 10-year financing, the person said. 

Funds from that loan were used to finance spectrum it acquired during a costly 3G auction, as well as for the purchase of equipment from China's Huawei Technologies Co Ltd and ZTE Corp, Reliance Communications said at the time. 

The Indian cellular firm, battered by fierce competition and thwarted in several attempts to strike deals to ease its debt, has seen its shares get hammered over the past few years. The stock rose 1.3 percent on Wednesday to close at 82.10 rupees, far below the 654-rupee conversion price on the convertible bonds, which were issued in February 2007 when Indian markets were booming. 

Shares in the company, which has reported eight straight falls in quarterly profit, were trading around 410 rupees when the company issued the bonds 2007. 

More than two dozen Indian companies in the BSE-500 index face redemptions on foreign currency convertible bonds worth a combined 330 billion rupees ($6.36 billion) by the end of March 2013, according to research by Indian brokerage Edelweiss

A global dollar funding crunch as western banks conserve capital and the rupee's 16 percent fall in 2011 make for a challenging refinancing environment for Indian companies. High domestic interest rates after 13 policy rate increases since March 2010 make local finance less attractive.

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