Anil Ambani’s Reliance Infrastructure Limited (R-Infra) signed an Intercreditor Agreement (ICA) with all of its lenders, gaining six months’ time to raise funds to repay its debts. While this agreement is said to be in line with the Reserve Bank of India’s (RBI) 7 June circular on resolution of stressed assets, this is its second standstill agreement with its lenders this year as the Reliance Group in February had made a similar agreement with its lenders who had then agreed not to sell any of the shares pledged by promoters till September, 2019.
“Reliance Infrastructure has now achieved standstill for 180 days as per the ICA. According to the RBI Circular, the Resolution Plan of Reliance Infrastructure is to be implemented within 180 days,” R-Infra said in a statement on Thursday, July 11. The company said it is confident of implementing its “Resolution Plan well before the 180-days deadline based on advanced progress of its various asset monetisation initiatives.”
The ICA is for the R-infra’s standalone debt, which was about Rs 6,000 crore as of March 2019. R-Infra is a part of theReliance Group and is a parent company with subsidiaries, associates and joint ventures. The consolidated debt of parent company R-Infra, adds up to Rs 15,860 crore, as of March 2019, according to the company releases.
Reliance Monetisation Drive
R-infra has already announced the sale of Delhi-Agra Toll Road for enterprise value of Rs 3,600 crore. With this single transaction, the company claims that its debt will be reduced by over 25%, bringing the debt amount close to just a little over Rs 4,000 crore. Also, the company is planning to monetise its 7 Lakh Sq. Ft. Reliance Center in Santacruz by way of long-term lease.
Earlier in August, 2018, the company sold its Mumbai power distribution business for Rs 12,700 crore to Adani Transmission Limited.
According to the Reserve Bank of India’s (RBI) June 7 circular, the lenders are mandated to sign an intercreditor agreement within 30 days of default. While the ICA sets rules for finalising and implementation of a resolution plan, the decision agreed by 75% of the lenders, is binding on others as well. In addition to this, the ICA has a standstill clause which bars initiation of insolvency proceedings for an agreed period. However, those lenders against signing the standstill, can file a suit under the Insolvency and Bankruptcy Code. In R-Infra's case, all its 16 lenders have signed the standstill clause.
Standstill Agreement with Lenders Concerning Pledged Shares
Following a public spat between Reliance Group and two of its lenders- Edelweiss and L&T Finance, who released a part of the Reliance Group’s shares pledged with them, the Group signed a standstill agreement with 90% of its lenders who agreed not to sell any of the promoters’ pledged shares till September 30, 2019, in cases of lower collateral cover due to fall in share prices.
The Reliance Group agreed to pay the principal and interest to the lenders as per the scheduled due dates specified in the loan agreements. As Mutual Funds investors such as Templeton MF, DHFL Pramerica MF, Indiabulls MF are key lenders under this agreement, market regulator Securities and Exchange Board of India (SEBI) in June, tightened norms for fund houses entering such agreements.