China Development Bank files insolvency suit against debt-ridden Reliance Communication

Fresh trouble for Reliance Communications (RCom) as China Development Bank filed insolvency case against the company under the Insolvency and Bankruptcy Code, sources aware of the development confirmed.

The Chinese lender lent close to Rs 11,570 crore ($1.78 billion) to Anil Ambani-owned company. The bank filed the insolvency petition before the Mumbai bench of the National Company Law Tribunal (NCLT), Mint reported.

However, it is learnt that Indian lenders may oppose the Chinese bank's petition as they are already working on a debt resolution plan with RCom, said a banking source.

Earlier, RCom's operational creditors Ericsson India and Manipal Tech have already filed bankruptcy petitions against the telecom company, as dues were not cleared.

Meanwhile, RCom said, "The Company has not been served any notice of the application filed by China Development Bank with NCLT, as reported in the media," in a stock exchange filing.

As of March 31 2017, the telecom company's total debt stood at Rs 44,345 crore, according to the company's financial statement.

The Chinese bank was "actively participating" in the joint lenders forum that restructured RCom's debt under the strategic debt restructuring (SDR) rules, reported the business daily.

SDR allows banks to convert part of their loans into equity and take control over the management of a debtor.

"The Company continues to remain engaged with all Lenders including the China Development Bank and is confident and committed to a full resolution with the support of all the Lenders," RCom said in its statement.

Earlier in May, the Chinese lender had filed a petition against the RCom-Aircel merger to seek a road map from the company on how it would settle its loans. As the RCom-Aircel merger fell through, RCom had to withdraw the merger petition from the NCLT.

If China Development Bank's petition gets admitted, domestic banks which owe money from RCom will be forced to set up a lenders consortium to take forward the insolvency proceedings.

On Monday, shares of Reliance Communications slipped 1.11 percent to Rs 13.35 while the benchmark Sensex rose 0.13 percent to end the day at 33,724.44 points.