RCom secures loans to refinance forex bonds

MUMBAI, INDIA: Reliance Communications said on Tuesday it has secured loans from a host of Chinese banks to refinance $1.18 billion worth of outstanding foreign currency bonds due for redemption on March 1.

The deal will provide respite to the No. 2 Indian mobile operator by subscribers, controlled by billionaire Anil Ambani, that has been trying for more than a year to sell its telecoms tower unit to cut the company's about $6.5 billion debt.

Reliance Comm said Industrial and Commercial Bank of China, China Development Bank Corp, Export Import Bank of China and other banks were funding the refinancing of the outstanding foreign currency convertible bonds (FCCBs).

The company said it would benefit from extended loan maturity of seven years and "attractive" interest cost of about 5 per cent, sending its shares up as much as 5.7 per cent in a Mumbai market that rose 1.5 per cent.

The FCCBs were issued in February 2007 when the Indian markets were booming, with a conversion price of Rs. 654 a share. Cut-throat competition among India's mobile phone operators has since hit earnings and shares have plunged.

Reliance Comm shares were trading around Rs. 90 on Tuesday, a fraction of the conversion price.

A source told Reuters last week that Reliance Comm was in talks with China Development Bank for a syndicated loan to redeem the bond.

China Development Bank arranged loans worth $1.93 billion for Reliance Comm last March, which the company used to finance radio airwaves it acquired during a costly 3G auction, as well as for the purchase of equipment.

With its bruising debt load and a ferociously competitive 15-operator market, Reliance Comm has reported eight straight quarters of falling profits.

The company is in talks with US buyout giants Carlyle Group and Blackstone Group on a deal for the towers business which could be worth more than $3 billion, sources have said, but a deal is not close to completion.

Reliance Comm 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 sources said.