The company is likely to use the proceeds from the proposed NCD issue to replace debt taken from banks at interest costs in excess of 12% annually. Reliance Communications has reached out to various large domestic financial institutions to market the NCD issue, according to a person familiar with the fund-raising exercise.
The company's proposed NCD issue has been awarded 'AA' credit rating by ratings agency CARE, according to a release on the agency's website.
In response to queries on the proposed NCD issue, a spokesperson for Reliance Communications said in an emailed response, "RCOM's Long term AA rating is only an enabling rating to pursue RCOM's ongoing financing programs within its current overall debt".
CARE has put the assigned rating on 'credit watch' highlighting key risks such as the decline in financial performance of the company in FY11, increased borrowings to fund the 3G spectrum fee and a delay in infusion of additional equity to improve the company's capital structure as causes of concern.
The telecom major had net debt of $6.5 billion as of September 2011 of which a major tranche of $925 million in the form of foreign currency convertible bonds ( FCCB) is due for redemption in March this year.
The company has been in talks with private equity investors such as Blackstone and Carlyle to sell a stake in its telecom tower business but has so far failed to reach a conclusive deal. A deal for the tower arm which is likely to be valued at between $3.5-4 billion could help the company reduce its debt and improve its capital structure.
Reliance Communications has also been in talks to line up a $925 million credit facility from China Development Bank according to recent media reports.
(Source- http://economictimes.indiatimes.com)
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