Indian operator Vodafone Idea (aka VIL) may have finally found a way to solve at least one of its debt issues after announcing plans to issue debentures worth 16 billion rupees (about US$195.6 million) to American Tower Corporation (ATC).
The VIL board has agreed to settle the debt to ATC by converting the due amount into equity, if the amount remains unpaid in 18 months. According to India’s Economic Times, at an Extraordinary General Meeting (EGM) held this week, 99.99 per cent shareholders voted in favour of the "special resolution for issue of securities on a preferential basis".
The Economic Times explains that the maximum term of the optionally convertible debentures (OCDs) is 18 months from the date of issue and allotment of the first tranche of the OCDs. The OCDs provide options to investors to convert the debt into equity in case of non-payment of dues and interest within stipulated timelines.
It’s not clear where this leaves the other large VIL debts owed to Indus Towers and a number of other vendors, not to mention VIL’s ongoing network upkeep and 5G investment plans.
In addition VIL some while ago chose to convert about 160 billion rupees (US$1.955 billion) of interest liability payable to the government into equity. This will amount to around a 33 per cent stake in the company. However, the government has not yet converted the debt into equity.
Indian media have calculated that the company's total gross debt, excluding lease liabilities and including interest accrued but not due, stands somewhere in the region of 2.2 trillion rupees or a staggering US$ 26.9 billion.