NCLT approves Aircel’s resolution plan

The National Company Law Tribunal (NCLT) has approved the insolvency resolution plan for Aircel after it voluntarily filed for bankruptcy in 2018. UV Asset Reconstruction Co. Ltd (UVARCL) would take over Aircel’s assets. The two year process has now ended and is considered to be the first of its kind in the telecom sector.

Aircel is owned by Malaysia’s Maxis and has narrowly escaped liquidation. According to people familiar with the matter, Aircel’s financial creditors may recover only 10-15% of the loans they extended. Aircel’s lenders include State Bank of India, Bank of Baroda, Punjab National Bank, China Development Bank Corp. and Canara Bank.

According to sources, the plan was to recover about Rs. 5000 crore – Rs. 6000 crore. However, Aircel’s resolution professional Deloitte had verified claims to the tune of Rs. 20,000 crore, which means recoveries for lenders of about Rs. 2,000 crore – Rs. 3,000 crore (10-15%) of the money loaned to Aircel.

According to the plan approved in May 2019, UVARCL is to said to take over the business as a going concern and run the smaller units such as the bulk SMS and enterprise divisions.

UVARCL is a Securitisation Company/Reconstruction Company registered with the Reserve Bank of India and was set up in the year 2007.

Aircel’s most coveted asset is its 4G spectrum in the 900 Mhz, 1800 Mhz and 2100Mhz bands in the  Andhra Pradesh, Delhi, Karnataka, Mumbai, Rajasthan and Tamil Nadu circles, which are valid until 2026. The operator had previously told the NCLT that the spectrum was worth Rs. 1,100-2,000 crore. According to sources, the value has been fast diminishing given that the government is planning to auction 4G airwaves by September-October.

The sources also said that the recovery would have been faster, had the approvals come earlier. But now, in this economic scenario, valuations and recovery options have become less. At the time of the approval of the plan by the Committee of Creditors, lenders had hoped to get 15-20% of their claims.

Aircel and its units Dishnet Wireless and Aircel Cellular , which ran mobile services across India and was particularly strong in the south, stopped operations in March 2018 and voluntarily filed for bankruptcy. Aircel is the first in the telecom sector to voluntarily file for bankruptcy. After the entry of Reliance Jio Infocomm which gave a tough competition, Aircel was put under pressure due to the intense price competition and burdened by debt of Rs. 26,000 crore taken to acquire airwaves and fund expansion.

The resolution professional had received claims worth Rs. 20,000 crore from lenders and claims for a similar amount from operational creditors.

The new owners are likely to face legal challenges, especially from the telecom department, which has been fighting to take spectrum – Aircel’s main asset – off the sale table, saying it belongs to the government and should be returned since the telco hasn’t been paying its dues.

According to experts, the expected legal battle with the Department of Telecom (DoT) may further lessen the attractiveness of Aircel’s airwaves for the only possible bidders – Bharti Airtel, Reliance Jio and Vodafone Idea. The NCLT’s ruling on spectrum and its order on June 10 may have a bearing on Reliance Communications’ ongoing insolvency case, in which the DoT has raised similar objections, according to legal experts. UVARCL is on the brink of picking up the spectrum assets of RCom as well while its towers are likely to go to Jio, if NCLT approves the plan. In the Aircel case, the telecom department had filed claims worth about Rs. 10,000 crore, of which only Rs. 2,000 crore was approved by the resolution professional. The DoT had therefore objected to the plan on the grounds that a mere Rs. 16.50 crore was earmarked for all operational creditors, including itself, in the resolution plan.