UV Asset Reconstruction Company Ltd plans to resume certain operations of Aircel Ltd and sell several assets, as it aims to pay back Rs 6,630 crore ($870 million) to the lenders of the bankrupt mobile-phone operator.
The plans came to light when the National Company Law Tribunal released its order approving UV ARC’s proposal to take over Aircel and its two units after more than two years of insolvency resolution proceedings.
This is the first acquisition of a stressed asset by UV ARC under the Insolvency and Bankruptcy Code.
Aircel, which is majority-owned by Malaysia’s Maxis Communications Bhd, declared bankruptcy in February 2018 after merger talks with Anil Ambani-led Reliance Communications Ltd fell through a few months before. This led to failure in repaying debt of about Rs 19,790 crore to its creditors. Aircel’s two arms were also admitted to the NCLT.
Cumulatively, the total claims of the three companies stood at over Rs 58,760 crore.
UV ARC emerged as the frontrunner to take over Aircel last year. In May 2019, Aircel’s lenders, led by State Bank of India, cleared the ARC’s plan. The NCLT approved the proposal earlier this month, but released its order only now.
According to the NCLT order and a statement by UV ARC, the bad-loan buyer will take a 76% stake while the financial creditors will get 24% in Aircel Ltd and subsidiaries Dishnet Wireless Ltd and Aircel Cellular Ltd.
Also, the ARC will issue zero-coupon optionally convertible debentures to the lenders worth Rs 6,630 crore. These debentures will be redeemed over five years. If the ARC fails to redeem these debentures, the securities will be converted into equity shares giving the lenders a 74% stake in Aircel and its units.
Ritesh Aggarwal, CFO at UV ARC, said that the company plans to start some low-capital businesses to general revenue from Aircel. These include bulk text messages, data centre and telecom tower leasing. UV ARC will make an upfront equity infusion of Rs 11 crore to start these businesses.
According to the NCLT order, the company aims to generate revenue of Rs 69 crore in the first year, Rs 96 crore in the second year and Rs 125 crore in the third year from these activities.
Besides, the asset reconstruction company expects a refund of Rs 390 crore from the government. It also expects to realise Rs 450 crore by passing on the unabsorbed depreciation and carry-forward losses of Aircel to other buyers.
In addition, UV ARC will seek to sell Aircel’s real estate, optical fibre, towers, equipment and the right to use spectrum to mobilise around Rs 1,500 crore. Spectrum will account for a bulk of this amount, Rs 800-1,300 crore.
Aircel, which currently runs with 180 employees, had initially drawn interest from 45 suitors after it filed for bankruptcy. Eventually, only two—UV ARC and distressed asset management firm Eight Capital Advisory Services Pvt. Ltd—submitted their resolution plans. Eight Capital later withdrew from the race.
Set up in 2007, UVARC is promoted by individuals and backed by six public-sector banks—Central Bank of India, Bank of Maharashtra, Union Bank of India, Bank of India, United Bank of India and Allahabad Bank—and two insurance companies—United India Insurance Company and National Insurance Company.
Last year, it planned to float its debut fund of Rs 200-300 crore for buying distressed assets. It has assets under management of more than Rs 1,300 crore.