Reliance Communications (RCom) has been attempting to restructure its debt into a debt for equity swap. However this has just become harder as Fitch has withdrawn its ratings for the firm (its most recent rating on RCom debt was a C).
In addition, two more Chinese lenders - Industrial and Commercial Bank of China (ICBC), the country's biggest-listed lender by assets, and Export-Import Bank of China - are supporting China Development Bank in its effort to bring an insolvency case against RCom. The Chinese lenders are trying to recover about $2 billion that RCom owes them.
CDB is a policy lender 100% owned by the Chinese government and under the direct supervision of its State Council. The push from CDB comes as Anil Ambani has turned out to be a forgetful witness for the prosecution in the case hearings for the 2G scam this month. Anil Dhirubhai Ambani Group executives, are accused in the 2G case of creating a web of shell companies within the ADA group ,that allegedly aided in transferring money to companies run by Karunanidhi’s family members.
The proposal for lenders from RCom was to convert debt to equity that would give the lenders a 51% stake in the company. Some lenders, including the Chinese banks, have been reluctant to agree to such a conversion, in case RCom becomes subject to future investigations, devaluing their holdings even further. RCom's share price is sharply down on the news.