Indian operator Reliance Communications (RCom) has secured loans to the tune of US$1.2 billion from a trio of Chinese banks in order to payback a convertible bond due to be redeemed in March – helping the heavily indebted operator avoid a possible default. 

The refinancing is being funded by the Industrial and Commercial Bank of China Ltd (ICBC), Development Bank Corporation (CDB) and Export Import Bank of China (EXIM) on an “extended” maturity period of seven years with an interest rate of about 5 percent, described as “attractive.” 

RCom described the deal as "the largest refinancing in the history of Foreign Currency Convertible Bonds (FCCBs)" by any Indian firm.

According to the Financial Times, RCom’s original bond was issued at the height of India’s stock market boom in 2007 and was designed to be converted into RCom stock upon maturity. However, RCom’s share price has fallen drastically in the interim period, so almost all of it must now be repaid in full. RCom had net debt of US$7.19 billion in March 2011.

A banking source told the newspaper: “At a time in which liquidity is tight in India this is an extremely good deal for Reliance, and not the sort of deal they could have found elsewhere.”

The report suggests that RCom’s billionaire owner – Anil Ambani – had been able to secure the latest deal as he had previously struck deals with state-based Chinese vendors to supply kit for the operator’s 3G rollout.