Reliance Communications unit GCX files for bankruptcy

MUMBAI: MUMBAI: Global Cloud Xchange (GCX), a subsidiary of Reliance Communications (RCom), has filed for bankruptcy protection in a US court after missing payments on its $350 million of 7% bonds that matured in the beginning of August.
However the under-sea cable firm has chalked out a reorganisation plans which outlines ways that includes reduction of $150 million in bond debt. Also on the anvil are terms for a transaction through which GCX’s senior secured noteholders would become owners of the company and provide new loans to support and grow the business.

"The company has initiated a voluntary case under Chapter 11 of the United States Bankruptcy Code to effectuate the plan while continuing to serve its customers as usual," said the company in a statement on Monday.

GCX said that more than 75% of the firm's lenders have already committed their support for the plan. The firm which went for voluntary filing of bankruptcy said it will also undertake a sale process that welcomes additional prospective buyers.

“We appreciate the strong collaboration with our lenders, which has resulted in a plan of reorganization that allows us to honour our commitments to employees, customers and suppliers while also securing a financially strong future for our business,” said Bill Barney, chairman and CEO of GCX.

According to people aware of the development, there were discussions between GCX and the Committee of Creditors (CoC) that are part of RCom's insolvency process. A GCX team had even presented its plans to stay afloat to the CoC but those fell apart.

"CoC would have preferred that GCX did not go for bankruptcy now, but failed to convince them," said a person who is a member of the discussions.

This is because the undersea cable company's bankruptcy filing may further delay Anil Ambani-owned Rcom's insolvency process since the telco and its units will now have to consider if there are common creditors between the bankrupt firms or claims to be included.

So far RCom and its two units – Reliance Telecom and Reliance Infratel - have received claims of about Rs 90,000 crore from financial and operational creditors.

People who were part of the CoC meetings said the RCom insolvency process so far has been on track with around 12-14 expressions of interest having come for the bankrupt telco’s assets, which include-spectrum, fibre and towers.

“We are bound by confidentiality obligations and are unable to comment on client-specific matters.” said a Deloitte spokesperson. Deloitte is the resolution professional for RCom and its units.

RCom in its filings in May had also raised concerns over the erosion of its unit’s value.

Last December, rating agency Moody's Investors Service downgraded GCX's corporate family rating and senior secured bond amid ongoing uncertainty around refinancing its maturing bonds.