News Hour- Reliance Communications plans $1.5 bn from IPO of undersea cable unit: Report

NEW DELHI: Telecoms company Reliance Communications is looking to raise about $1.5 billion through an initial public offering of its undersea cable unit in Singapore, a source with direct knowledge said on Wednesday.

The debt-laden company, controlled by billionaire Anil Ambani, is planning to list the unit as a business trust and may sell 75 per cent of its stake in the planned IPO, said the source, who declined to be named.

"Reliance Communications continually works on various options to unlock value from its unique combination of global telecom assets for the benefit of its shareholders," a company spokesman said, but declined to comment on any planned IPO.

A newspaper said that Deutsche Bank is arranging the sale.

On Tuesday, Anil Ambani-owned telecom operator Reliance Communications raised $1.18 billion ( 6125 crore) from Chinese banks to repay lenders of its overseas convertible bonds the company had issued in 2007.

The company will have to repay the amount in seven years to a consortium of lenders led by Industrial and Commercial Bank of China, China Development Bank and Export Import Bank of China.

Reliance Communications' overseas bondholders have the option of converting the loan into shares at 661 apiece. On Tuesday, RCOM stock rose nearly 3% to close at 88.85 on the Bombay Stock Exchange.

The company has been attempting to sell stake in its telecom tower arm, Reliance Infratel, through which it is expected to redeem the bonds. There were reports that the company had reached a deal with private equity firm Blackstone, though executives involved in the talks said a final deal was at least two months away.

Should Reliance Communications conclude the deal, analysts said it should repay the current debt early. Although the company said interest rate on the current borrowing is merely 5%, the weak rupee could play spoilsport on the total fund costs.

"It (Reliance Infratel) has attracted many buyers, but Reliance never agrees to a reasonable price," said a person involved in a deal negotiation with the company. The best deal it was offered was worth 30,000 crore during talks with GTL Infrastructure.

Analysts say Reliance Communications doesn't have sufficient cash flows as it has to pay interest on its over 30,000-crore debt prior to this borrowing, and meet operational expenses and capital expenditure to expand its 3G footprint.
(Source- http://economictimes.indiatimes.com)