No impact of Aircel merger cancellation on RCom's rating: Moody's

No impact of Aircel merger cancellation on RCom's rating: Moody's”

Shares of Reliance Communications advanced in Wednesday's trade after its recent decision to call off the merger with Aircel.

"Reliance Communications Limited's (Rcom's) cancellation of the merger agreement of its mobile business with Aircel Limited has no impact on Rcom's Ca corporate family and senior secured bond ratings". "Legal and regulatory uncertainties, and various interventions by vested interests, have caused inordinate delays in receipt of relevant approvals for the proposed transaction", Prakash Shenoy, RCom secretary, said in a statement. Also, the merger would have eased the companies to pay down the combined debt that soared to about 600 billion rupees ($9.2 billion) as of the end of previous year. Speaking on the company's plans to raise funds to service the debt, Garg said that apart from selling the tower business, the company was also considering selling fibre optic, real estate and other assets, and would be able to raise 250 bln rupees, as stipulated earlier.

In a meeting with Board of Directors, RCom reviewed the ongoing strategic transformation programme, and considered alternate plans for debt reduction.

RCom also blamed high level of competition as one of the reasons for termination of the merger talks. As a result of the various factors aforesaid, the merger agreement has lapsed. On Sunday, RCom said both companies agreed to cancel the deal, which was slated to be completed this year. Foreign lenders too may have to take a Rs 6,000 crore haircut.

Following the downtrend in the stock, the market capitalisation of the company fell by Rs 523 crore to Rs 4,256.16 crore.

On the BSE, the stock hit a record low of Rs 16.75 during the day before closing at Rs 17.10, its lowest closing since the stock listed in July 2006, following the split of businesses between Mukesh Ambani and Anil Ambani. Shares of the company opened on a weak note at Rs 18.70 on the BSE, then lost further ground and fell to an intra-day low of Rs 16.75.

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