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Beleaguered telecom service provider Aircel has filed for bankruptcy protection with the National Company Law Tribunal (NCLT) in Mumbai, after its Malaysian promoter Maxis Communications decided against pumping additional funds into the company. Aircel was weighing various options, including venturing into 4G services through partnerships, but this entailed fresh fresh investments from promoters.
However, Aircel said that in a statement that filing of CIRP is not a proceeding for liquidation, rather is a process to find best possible resolution for the current situation. The move follows a Joint Lenders’ Forum meeting held in Mumbai today, wherein the lenders sought moving NCLT for bankruptcy protection.
Earlier on Monday, Global Communication Services Holdings (GCSH), a Mauritius-based subsidiary of Maxis Communications, said in an email response to BusinessLine that it had decided not to infuse further funds in to company .
The board of directors of the corporate debtor (Aircel Cellular, Dishnet Wireless and Aircel) have filed an application under Section 10 of the Insolvency and Bankruptcy Code, 2016 for undertaking Corporate Insolvency Resolution Process (CIRP) for the three companies,” Aircel said in a statement.
The board acknowledged that it has been facing troubled times in a highly-financially stressed industry, owing to intense competition following the disruptive entry of a new player, legal and regulatory challenges, high level of unsustainable debt and increased losses. This has caused significant negative business and reputational impact on the company, it added.
In 2016, in an effort to proactively undertake the first mobile industry consolidation, the company embarked upon a merger of its wireless business with another operator. 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.
'Not a proceeding for liquidation'
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 the vendors, distributors and employees among others to protect and preserve the value of the company and manage the operations.
Led by State Bank of India, the lenders, including China Development Bank, Bank of Baroda, Canara Bank and Punjab National Bank, had earlier stated that Aircel will have to cease operations in case shareholders decline to infuse funds.
Maxis holds a 74 per cent stake in the company, while the remaining 26 per cent is held by Sindya Securities & Investments. Aircel, in an early board meeting, had also said that the Department of Telecommunications is unlikely to release its ₹450-crore bank guarantee in the wake of recent reports on its insolvency.
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