Reliance bondholders form committee after default

HONG KONG: Bondholders of Reliance Communications Ltd, the embattled Indian mobile phone operator controlled by billionaire Anil Ambani ( pic), have hired advisers after the company defaulted on its dollar-denominated notes last month.

Certain investors holding a significant percentage of the securities have formed a committee, which has appointed PJT Partners Inc as its financial adviser and Kirkland & Ellis LLP as its legal adviser, according to a document seen by Bloomberg News. The group has commenced discussions with the company, it said.

Reliance Communications marked the highest-profile default on international debt by an Indian borrower since the nation’s insolvency and bankruptcy code was passed in May 2016, when it failed to pay interest on the dollar bonds last month. The company’s earnings slumped after deep-pocketed Reliance Jio Infocomm Ltd, backed by India’s richest man and Ambani’s older brother, started offering free calls last year.

Reliance Communications’ dollar note investors hold only a small portion of the company’s overall debt, so “it’s unclear what their negotiating power is”, said Pavitra Sudhindran, a credit analyst at Nomura Holdings Inc.

The outstanding amount of the securities is only US$300mill compared with the company’s total debt, which was about US$7bil as of the end of March, according to data compiled by Bloomberg.

Creditors have been circling. China Development Bank asked an Indian tribunal to place the mobile phone operator under insolvency proceedings, a source said in November. Public-relations firm Fortuna Public Relations Pvt made a similar request earlier this month. Reliance Communications has said that a standstill period for interest and principal repayments continues until December 2018.

In a call with bondholders in November, the company encouraged noteholders to form a committee.

“The committee and its advisers would like to engage with other noteholders to understand their positions and perspectives,” the document seen by Bloomberg News said.

Reliance Communications’ bonds due 2020 fell 0.6 US cent on the dollar to 36.8 cents yesterday, according to Bloomberg-compiled prices.