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With not much dry powder left and its majority shareholder is no mood to infuse further funds, the burden of the running the beleaguered telecom operator Aircel is now becoming the lenders’ responsibility.
The existing lenders, according to the Insolvency and Bankruptcy Code (IBC), would have to sanction additional “working capital loans” to ensure that the company’s operations are not stalled. Aircel’s Malaysian promoter Maxis Communications, for the second time, has decided not to pump in additional funds.
“The lenders’ worry is not about the haircuts but the additional investments they will have to make till the issue comes to a closure. The firm’s cash reserves will be only sufficient to run the firm for another month or two, while the operator, which had about ₹100 crore in its Trust and Retention Account (TRA), has not got any funding from it,” a source close to the development told BusinessLine .
TRA, which is generally earmarked for salaries and other operational purposes, was encashed by the lenders. Aircel is in discussions to raise an interim funding, sources added.
In April, Maxis Communications provided ₹95 crore to Aircel to settle outstanding staff salaries and meet immediate operational expenses.
“Given that the costs and expenses incurred by the RP for the Corporate Insolvency Resolution Process (CIRP) are accorded payment priority over all other debts, banks having an exposure to a company undergoing CIRP should not have any issue in sanctioning working capital loan. It is in their interest to pitch in with short-term loans to help complete the resolution process,” according to IBC rules.
“In case, the existing banks are unwilling then the RP can approach banks outside the consortium,” it added.
No more fund infusion
“Global Communication Services Holdings (GCSH) has completed all its obligations to fund Aircel in the past. Aircel shareholders have invested $7 billion to date with zero return. Despite this, GCSH had infused ₹95 crore into Aircel on March 31, to only cover unpaid salaries of Aircel staff for about a month-and-a-half, and certain expenses, which is up to the point when the IRP was appointed by NCLT,” GCSH, a Mauritius-based subsidiary of Maxis Communications, said in an email response to BusinessLine .
“Any additional funding by shareholders is unviable, given industry competition, and onerous legal and regulatory action. Decisions on management of, and any funding in Aircel will now be led by its CoC and the IRP,” it added.
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