Vodafone Idea lenders demand additional collateral on existing loans, Telecom News, ET Telecom

Mumbai: Vodafone Idea’s lenders have asked the cash-strapped phone company to provide additional collateral and security on existing facilities as well as higher interest rates on loans. Banks are also considering the need for telecommunications operators for additional bank guarantees to be provided to the telecommunications department.

“Lenders are worried about the recent downgrade of the phone company and are looking to change the covenants on loans with higher interest rates and to supplement the margin and security of existing facilities,” said a manager of the bank who did not wish to be named.

India’s third-largest telecommunications company recently informed the Supreme Court that it has “exceptional used facilities” of around Rs 47,000 crore from banks, non-bank financial companies and mutual funds, in more of its arrears to the Ministry of Telecommunications (DoT). These included Rs 25,000 crore taken from public sector banks.

The petition was against the higher court order that ignored the company’s request to ask the DoT to review “errors” in calculating its Adjusted Gross Income (AGR) contributions.

The ailing telecommunications company is also in talks with lenders to provide additional bank guarantees (BG) worth Rs 980 crore so that it can benefit from a moratorium on spectrum payments, another said. responsible for the bank.

Vi had written to the ministry in June asking for an extended moratorium and ET reported that the government was working on an aid plan that would likely include a moratorium on payments.

“Vi will need BG if he wants to ask for the moratorium and that is why they are talking to the banks,” a government official said.

However, lenders have yet to give the green light. In fact, in a recent meeting with DoT officials, the lenders said converting debt to equity in the telecommunications company was an option for them. However, the carrier has yet to default on payment.

Vi and its lenders did not respond to questions from ET until press time on Wednesday.

For banks exposed to the telecoms sector, Vi, if not saved, will become the third operator to go bankrupt after Reliance Communications and Aircel.

The State Bank of India, for example, has an exposure of around Rs 11,000 crore to the telephone company.

Vi said the group’s total debt stands at Rs 191,588.8 crore including the next tranche of AGR debt – around Rs 9,000 crore – and a debt amounting to Rs 16,853.4 crore is payable over the next 12 months.

“Said going concern assumption depends essentially on its ability to raise additional funds … and the clarity of the amount of the next payment, the acceptance of its deferral request by the DoT and the generation of cash flow from its operations which he needs to settle / renew his debts / guarantees as they fall due, ”Vi said last Saturday after reporting a loss of Rs 7,312.9 crore for the first fiscal quarter.

The downgrade of the telephone company is an additional concern. CARE Ratings recently downgraded the company to B-minus and kept it on credit watch with negative implications.

Vi has pointed out his viability issues and it depends a lot on the combination of the success of the telephone company in raising Rs 25,000 crore as he proposed, the government’s back-up plan and the relief from SC on the question of calculating the AGR.

“A capital increase or government back-up plan remains essential to provide immediate liquidity support to service the net debt up to Rs 1.9 lakh crore,” said a memo released by Motilal Oswal.

The telecommunications company’s survival issue became central when Kumar Mangalam Birla resigned earlier this month from the board of directors of the company, a joint venture between his group Aditya Birla and UK group Vodafone. The move came less than two months after he wrote to the government proposing to sell the group’s stake in Vi to any public sector or national financial entity that could keep the company afloat.

On Saturday, cash-strapped Vi’s June quarter losses widened to Rs 7,312.9 crore, from Rs 6,985.1 crore in the previous three-month period, due to a mixture of higher interest costs and heavy customer losses.

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