By Devina Sengupta ET
Mumbai: The National Company Law Tribunal (NCLT) has approved the insolvency resolution plan for Aircel that will see UV Asset Reconstruction Co. Ltd (UVARCL) take over the operator’s assets, said people with knowledge of the matter. This marks the end of a two-year process that was the first of its kind in the telecom sector and will likely see among the lowest recoveries for lenders among major bankruptcy cases in India, they said.
“NCLT approved the resolution plan on Tuesday,” said a person directly involved in the case. While Aircel, owned by Malaysia’s Maxis, may have narrowly escaped liquidation, its financial creditors may recover only 10-15% of the loans they extended, another person directly familiar with the case told ET.
Aircel’s resolution professional Deloitte had verified claims to the tune of Rs 20,000 crore, which means recoveries for lenders of about Rs 2,000 crore-Rs 3,000 crore of the money the money loaned to the telco. But according to sources , the plan was to recover about Rs 5000 crore -Rs 6000 crore . Aircel's lenders include State Bank of India, Bank of Baroda, Punjab National Bank, China Development Bank Corp. and Canara Bank.
UVARCL is to take over the business as a going concern and run the smaller units such as the bulk SMS and enterprise divisions, according to the plan okayed in May 2019. The rest of the assets were to be sold with that money going to the lenders. At the time, recovery was estimated at 12-36 months.
Aircel's most coveted asset is its 4G spectrum in the 900 Mhz, 1800 Mhz and 2100Mhz bands in the Andhra Pradesh, Delhi, Karnataka, Mumbai, Rajasthan and Tamil Nadu circles, which are valid until 2026. The operator had previously told the NCLT that the spectrum was worth Rs 1,100-2,000 crore. But that value has been fast diminishing as expiry approaches and the government planning to auction 4G airwaves by September-October, said people familiar with the matter.
“Had the approvals come earlier, recovery would have been faster,” said one of the persons. “But now, in this economic scenario, valuations, recovery options become less.” At the time of the approval of the plan by the committee of creditors, lenders had hoped to get 15-20% of their claims.ET broke the story in its online edition on Tuesday afternoon.
Aircel and its units Dishnet Wireless and Aircel Cellular , which ran mobile services across India and was particularly strong in the south, stopped operations in March 2018. They voluntarily filed for bankruptcy–the first in the sector to do so--after coming under pressure due to intense price competition after the entry of Reliance Jio Infocomm and burdened by debt of Rs26,000 crore taken to acquire airwaves and fund fund expansion. The resolution professional had received claims worth Rs 20,000 crore from lenders and claims for a similar amount from operational creditors.
UVARCL was set up in 2007 and counts Central Bank of India, Bank of Maharashtra, Union Bank of India, Bank of India, United Bank of India, Allahabad Bank, United India Insurance Co. and National Insurance Co. as stakeholders. It will now take over the reins of the telco from Deloitte.The new owners may face legal challenges, especially from the telecom department, which has been fighting to take spectrum – Aircel’s main asset – off the sale table, saying it belongs to the government and should be returned since the telco hasn’t been paying its dues.
“We are bound by confidentiality obligations and are unable to comment on client-specific matters.” said a Deloitte spokesperson. .UVARCL did not respond to ET's queries.
The bankruptcy court rejected the argument but the Department of Telecommunications (DoT) may dispute that in court, experts said.
“An NCLT order is not enough and DoT will not let go of its spectrum and its approval is needed as well,” said Saurav Kumar, partner, Indus Law. “The government can challenge the challenge the NCLT order in an appellate court and take it up to the Supreme Court for non-payment of spectrum dues.”
But he added that the NCLT order would act as guidance and, if unchallenged, be implemented immediately.The expected legal battle with DoT may further dampen the attractiveness of Aircel’s airwaves for the only possible bidders – Bharti Airtel, Reliance Jio and Vodafone Idea, experts said.
The NCLT’s ruling on spectrum and its order on Tuesday may have a bearing on Reliance Communications ongoing insolvency case, in which DoT has raised similar objections, said legal experts. UVARCL is poised to pick up the spectrum assets of RCom as well while its towers are likely to go to Jio, if NCLT approves the plan.
In the Aircel case, DoT had protested that a mere Rs 16.50 crore was earmarked for all operational creditors, including itself, in the plan. The telecom department had filed claims worth about Rs10,000 crore, of which only Rs2,000 crore was approved by the resolution professional.
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