(Bloomberg) -- A unit of Reliance Communications Ltd., Anil Ambani's distressed telecom firm, has filed for bankruptcy protection.
GCX Ltd., which owns the world's largest private undersea cable system, is the latest company owned by the tycoon to stumble. The former billionaire's Reliance Communications itself fell back into bankruptcy earlier this year. The move by subsidiary GCX comes after it missed payment on its $350 million of 7% bonds that matured on Aug. 1.
Ambani has been waging a war on debt, and Reliance Group has said that it planned to raise about 217 billion rupees ($3.1 billion) by selling assets from roads to radio stations in a bid to cut borrowings. Read more about that here.
India has been grappling with the world's worst bad-loan mess, and a deepening shadow-banking crisis and hurdles in bankruptcy rules are set to prolong that struggle.
"We will likely see more India companies struggling to repay their debt," said Trung Nguyen, a senior credit analyst at Lucror Analytics. The situation in India is "highly worrying" with a sharp slowdown in the economy and a liquidity crunch due to the collapse of the shadow banking system, he added.
Reliance Naval & Engineering Ltd., another firm controlled by Ambani, said recently it is facing an acute cash-flow crunch after orders dried up amid efforts to restructure a pile of debt.
GCX and other firms said that they plan to implement a prepackaged plan that could include a debt-to-equity swap and also concurrently, a marketing process to solicit bids for the sale of their business, according to a court filing. Holders of about 76% of senior notes have committed to the plan, the filing also said.
GCX said in July that it had reached a forbearance pact with holders that provided additional time to discuss options related to the maturity of its bonds. Moody's Investors Service cut its rating on the firm to Ca last month, as it considered the missed payment on the $350 million bonds a default.
GCX along with other associates filed for Chapter 11 bankruptcy protection at the Delaware court, according to a court filing.
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