Aircel files for bankruptcy; cites unsustainable debt

Lenders had earlier asked Aircel promoter, Malaysia-based Maxis, to invest at least $1 billion into the company so that it can meet financial obligations. Aircel has already defaulted on repayment of interest on its debt obligations due to its weak liquidity position, which worsened after the launch of Jio’s free services in September 2016.

In 2016, the company embarked upon a merger of its wireless business with Reliance Communications. However, on account of various issues and hurdles faced, the merger did not succeed and ultimately lapsed in September 2017.

“Post detailed discussions with the financial lenders and shareholders, the Company could not reach consensus with respect to restructuring of its debt and funding. Despite these discussions and the invoking of a Strategic Debt Restructuring scheme in January 2018 pursuant to the then guideline of the Reserve Bank of India (RBI), no agreement could be reached. Under current circumstances, especially after the February 12, 2018, RBI guidelines, the company believes resolution process under the code is an appropriate recourse,” it added.

Maxis holds a 74 per cent stake in the company, while the remaining 26 per cent is held by Sindya Securities & Investments.

The company also said it believes that in the current circumstances, resolution process under the Insolvency and Bankruptcy Code is an “appropriate recourse”. “The company would like to emphasise that CIRP is not a proceeding for liquidation, rather is a process to find best possible resolution for the current situation and that would be in the best interest of everyone (vendors, distributors, employees, etc) to protect and preserve the value of the company and manage the operations,” it added.

Aircel said it will strive to provide uninterrupted service connectivity to its customers and sought their support in the “current difficult period”.

According to Indian Banks Association estimates, the total liabilities of the telecom sector stood at Rs 775,000 crore as of March, 2017 of which bank borrowings and liabilities towards spectrum payment to the telecom department stood at Rs 580,000 crore.

Companies in the telecom sector have been battling pressure on margins and revenue streams after the entry of Reliance Jio Infocomm in September last year, which after offering free services for almost seven months announced an intense tariff war by way of rock-bottom data prices.