Reliance Infra lenders sign debt resolution pact; stock jumps nearly 11%

Anil Ambani-promoted Reliance Infrastructure (RInfra) on Thursday said its lenders had entered into an inter-creditor agreement (ICA) to implement a debt resolution plan within six months. The announcement led to a rally in RInfra shares, which surged about 11 per cent to close at 51.05 on the BSE.  

“RInfra’s 16 lenders have signed the ICA. In accordance with the Reserve Bank of India’s (RBI’s) circular of June 7, 2019, 100 per cent of its lenders have signed the ICA for the resolution of RInfra’s debt,” the company said in a statement. “RInfra has now achieved standstill for 180 days. According to the RBI circular, the resolution plan is to be implemented within 180 days.” 

The ICA is for the company’s standalone debt, which was about 6,000 crore as of March 2019.

An ICA allows for all lenders to decide a resolution for the company’s debt collectively. Individual creditors cannot take any separate action in relation to the debt given and collateral taken from the company.

The move follows multiple developments in the company and the group in the past one month. Price Waterhouse & Co (PWC) resigned as auditors of Reliance Capital and its subsidiary Reliance Home Finance (RHFL) on June 12. Auditors of RInfra also expressed concerns about the company’s FY19 financial results, stating they were unable to give an audit opinion on the same. 

For Reliance Power’s (RPower’s) March-quarter results, auditors flagged the withdrawal from general reserves, depreciation methods, and certain related-party loans. BSR & Co and Pathak HD & Associates are auditors of RInfra and RPower.

A month ago, Reliance Group Chairman Anil Ambani had said the group had paid off debt worth Rs 35,000 crore in the 14 months between April 2018 and May this year largely by selling assets. Weeks later, CARE Ratings downgraded the company to a ‘default’ rating. In its bid to accelerate its asset monetisation, RInfra also announced plans to monetise its Mumbai headquarters real estate through long-term lease in June. In its Thursday announcement, the company further said, “RInfra is confident of implementing its resolution plan well before the 180-day deadline based on advanced progress of its various asset monentisation initiatives.”

The monetisation plan also includes sale of its road portfolio in nine projects. In addition, the company has entered into a sale agreement for its Delhi-Agra toll road for Rs 3,600 crore, which is yet to be completed. In its statement, RInfra said it aimed to be debt-free by 2020. 

The timeline is an extension from what Ambani envisaged in August last year. In a press conference then, Ambani had said, “RInfra will be a zero-debt company next year.” RInfra’s consolidated debt was Rs 15,860 crore as of March 2019.

In August last year, RInfra also divested itself of its marquee Mumbai power distribution asset for Rs 12,700 crore. The company has been struggling to sell its road portfolio for the past couple of years, including a failed attempt to use the infrastructure investment trust route.

In a statement on Thursday, RPower said it recast Rs 2,430 crore worth of debt for its Samalkot power project with US-EXIM, extending its final maturity to June 2022. RInfra is a promoter firm for RPower.