Lenders plan Aircel, GTL Infrastructure merger to clear combined debt

Look at March 31 as the proposed deadline to initiate the process

Lenders to Aircel and GTL Infrastructure have come up with a solution to clear the combined debt of the firms. They are looking at the option to merge the firms so that the new entity gets a stable earning. The lenders are looking at March 31 as the deadline to initiate the merger.

This comes after a proposed merger of Aircel with Reliance Communications (RCom) was called off, and banks are left with deteriorating financial health of the company as the Aircel’s shares are pledged with them.

The lenders have also asked Maxis, the Malaysian promoter of Aircel, to bring in fresh equity worth at least Rs 40 billion into its Indian arm. Part of the proceeds would be used for the GTL Infrastructure merger and to repay debt. 

The lenders are staring at huge provisioning as Aircel has failed to repay its debt on time and telecom tower firm, GTL Infrastructure, is in the final stages of exiting the strategic debt restructuring programme.

If Aircel and GTL Infrastructure join forces, the merged entity would earn up to Rs 9 billion as Ebitda (earnings before interest, depreciation, tax and amortisation), which can be used to repay bank loans, a source close to the development said. 

The merger, according to a banker, will be the final attempt to save the beleaguered wireless telephony company, which is fast losing market share to bigger firms like Bharti Airtel, Vodafone-Idea, and Reliance Jio. Aircel’s losses for calendar 2016 doubled to Rs 43.19 billion as against a loss of Rs 22.15 billion in calendar 2015. At the same time, its profit before interest, depreciation and tax in calendar 2016 fell to Rs 5.98 billion as against Rs 14.29 billion in calendar year 2015. The lenders said the company’s financials for the calendar 2017 worsened and, if no action is taken, it will have to exit wireless services like Tata Teleservices and RCom did.

Aircel has already delayed interest repayments on debt obligations worth over Rs 174 billion on account of weak liquidity position, which worsened after the launch of Jio’s free services in September 2016. Aircel plans to withdraw services in six circles from this month end, and is now focusing only on profit-making circles.  

GTL Infrastructure, on the other hand, is open to merger, provided Aircel pays all its dues first of around Rs 2.3 billion and pays market valuation for the company. GTL Infrastructure’s secured debt is Rs 41.93 billion. 

As on December 2017, Indian lenders hold more than 70 per cent stake in GTL Infrastructure while its promoter, GTL Ltd, owns 14 per cent stake. In the GTL Infrastructure sale process, overseen by EY, the company had received 20 proposals. But lenders see a merger between Aircel and GTL Infrastructure to be a win-win solution for both companies. 

In December 2017, GTL Infrastructure announced that its foreign currency bonds were converted into equity at the rate of Rs 10 a share. As on Thursday, the market price of GTL Infrastructure was Rs 7 a share. 

RCom and Aircel had signed binding agreements in September 2016 for a merger. But with the Supreme Court still hearing a 2005 case on the acquisition of Aircel by Maxis, the department of telecom refused to give its permission to the merger. With the deal collapsing, RCom decided to sell its spectrum, towers to Jio for up to Rs 240 billion. RCom is also selling its real estate for another Rs 100 billion. All proceeds will go to repay banks.