Bank of Baroda in Plans for the International Auction of Rs 1,838 Crore RCom Debt

Bank of Baroda, it is learned, has classified its RCom exposure as an NPA and will shortly invite Eols from the potential buyers keen to pick up the debt.

Kolkata/ Barcelona

Bank of Baroda as lined up plans to seek its Rs 1,838.16 crore debt in beleaguered Reliance Communications (R Com) through an international auction, and is likely to float a tender for the same shortly, two people aware of the matter said.Bank of Baroda it is learned has classified its RCom as a non-performing asset (NPA), and will shortly invite the expressions of interest from the strong buyers who are eager to pick up the debt.
These recent preliminaries came in the aftermath of R Com recently announce plans to move the insolvency tribunal, seeking bankruptcy protection as its lenders haven’t received any proceeds from its property monetization plans over the past 18-odd months.
In a separate development, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has asked the telecom department (DOT) to reconsider approval for RCom’s pact to sell spectrum to Reliance Jio, since the liability of past spectrum-related dues, it said, lies purely with the seller and not the buyer of airwaves. The buyer, it said, cannot be held liable until the airwaves trading has materialized.
The DoT had refused to clean up the spectrum sale after Jio said it wouldn’t be held liable for the RCom’s past dues. RCom had, subsequently, sought a clarification from the telecom tribunal on the spectrum trading rules.
RCom is now expected to move Supreme Court to seek enforcement of the telecom tribunal on the spectrum trading rules.
RCom is now expected to move Supreme Court to seek enforcement of the telecom tribunal verdict.
Meanwhile, as far as the auctioning is concerned, Bank of Baroda is likely to rely on global auctioning pricing trends, where the existing debt by a bank is specified to the value of existing bonds or other monetary instruments in play in the overseas market of the borrowing company  -- the case, RCom.
RCom has outstanding overseas bonds of $ 300 million (approximately Rs 2100 crore), in the global market, but since these bonds have a ‘D’ or ‘default’ rating, they are likely to be priced at a minimum discount of 75 percent of the value.
Accordingly, international bidders, those who are lined up for BOB RCom debt are likely to quote a bid that is at least 75 percent in line with the current market value of the Anil Ambani-led company’s overseas bonds.
In case of such scenarios, Bank of Baroda can hope to get a maximum bid of around Rs 450-460 crore, roughly a fourth of Rs 1,838.16 crore exposures in RCom or even less, said the second person cited.
At press time, RCom and Bank of Baroda did not reply to ET’s query.
Although the Industry experts said it remains to be seen whether Bank of Baroda will be ready to take such a hefty haircut in case of its RCom exposure.
A person who is aware said taking a hair-cut might be “the best option for Bank of Baroda,” with no concrete developments in RCom’s property monetization ever since the telco entered the strategic debt restructuring (SDR) process in June 2017.