RCOM signs US $1.93bn loan deal with Chinese bank

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RCOM signs US $1.93bn loan deal with Chinese bank
The debt-ridden ADAG company, Reliance  Communication (RCOM) has completed the
final documentation with China Development Bank (CDB) for `6,000cr (US $1.33bn) loan
facility. Terming the loan to be the largest in the history of the telecom sector, the company
said it will use the proceeds of the loan for refinancing RCOM’s 3G spectrum fee and
imports of the telecom equipment. The facility is fully underwritten by CDB and will be
funded by a syndicate of Chinese banks/financial institutions, including CDB.
RCOM has also signed an additional agreement for credit worth `2,700cr (US $600mn)
with CDB for financing imports and domestic expenditure of the telecom equipment from
Chinese vendors, namely Huawei and ZTE. The company has already received the RBI’s
approval for the facilities and draw down is expected to commence shortly, the statement
said. The aggregate financing of  `8,700cr (US $1.93bn) has a maturity period of 10
years. RCOM, which had a debt of over `32,000cr as of December 2010, benefits from
the extended loan maturity of 10 years and substantial savings in interest costs.
We recommend Accumulate on the stock with a Target Price of `106.