Anil Ambani led group’s debt ridden Reliance Communications (RCom) has entered into an agreement for a $1.18 billion loan (Rs. 6,125 cr.) from three leading China banks.
The banks which would provide the loans are Industrial and Commercial Bank of China (ICBC), China Development Bank (CDB) and Export Import Bank of China (EXIM), among others. The loan will be used to refinance the maturity value of its outstanding FCCBs (foreign currency convertible bonds) worth $1.18 billion.
This is believed to be biggest ever biggest ever overseas loan refinancing arrangement by any Indian company.
"This is the largest refinancing in the history of FCCBs by any Indian corporate . RCOM will benefit from extended loan laon from maturity of seven years and an attractive interest cost of about 5%. The loan proceeds would be used for refinancing the entire redemption amount of FCCBs which are due for redemption on March 1, 2012," RCom said in a statement.
In March 2011, RCOM received a $1.93-billion from Chinese banks to refinance 3G spectrum fees for imports of Chinese telecom equipment from Huawei and ZTE. According to Bloomberg, the Chinese loans will help Reliance Communications cap its interest expense for the borrowing at 5 percent even after dollar funding costs for Indian companies rose 171 basis points in 2011 to 6.83 percent, according to HSBC Holdings Plc. The credit helps China expand its role in the world’s second-fastest growing major economy that’s also competing with the north Asian nation for resources, said Erica Downs, a fellow at The Brookings Institution.