RCOM set to raise $500m abroad

Flag Telecom To Float Bonds In European Mkt To Meet Debt Obligations

AFTER failed efforts to sell equity, Reliance Communications (RCOM), Anil Ambani's cash-strapped telecommunications company, is tapping the bond markets. Flag Telecom, a part of its international network arm Reliance Globalcom, could raise at least $500 million by selling bonds to European investors, said a number of investment banking sources.
    RCOM has appointed Deutsche Bank's investment banking arm to spearhead the latest fund-raising effort. If successful, the funds will be used to meet debt obligations, including $200 million worth of convertible bonds held by overseas investors due May 2011.
    Executives at Reliance Communications did not respond to queries while Sanjay Agarwal, head of investment banking in India at Deutsche Bank, declined comment.
    The company has another $900 million of foreign currency convertible bonds, or FCCBs, maturing February 2012. The company has a current net outstanding debt—which rose over 700 crore between July and September this year—exceeding 30,000 crore. Previous attempts failed
THE effort to raise fresh debt comes after several recent failed attempts by the company to gather funds through asset divestitures, in part or full, of its telecom tower business and Globalcom.
    Intense competition in the world's fastestgrowing mobile markets has dented its profits. The company reported a 40% plunge in profits in the second quarter of this fiscal to 446 crore—its fifth-straight quarter of profit fall.
    Reliance Communications acquired Flag Telecom, the undersea cable business, in 2003 for about $207 million. After a recent restructuring, the company's Indian enterprise business has been added to Reliance Globalcom. Speculation is rife that the restructuring was done largely to make the unit attractive to potential suitors.
    Until two years ago, RCOM had said it planned to launch an overseas public share sale of Globalcom. That plan was shelved.
    The company was recently involved in another deal discussion, to merge its tower business with GTL Infrastructure, to create the world's largest independent telecom infrastructure company. That deal was scrapped early September. Recent efforts to part-sell Reliance Communications to a strategic investor also did not fructify.