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Bloomberg is reporting that Anil Ambani’s Reliance communications was forced to borrow from Chinese lenders to redeem convertible debt:Ambani’s Reliance Communications Ltd. yesterday said it will borrow $1.18 billion from lenders including China Development Bank Corp., Export-Import Bank of China and Industrial & Commercial Bank of China. The proceeds will help India’s second-largest mobile-phone operator redeem convertible debt maturing on March 1. The shares are trading 87 per cent below the price at which the notes can be switched to equity.
…The loan to Reliance Communications will have an “extended” seven-year maturity with an interest cost of 5 per cent, according to yesterday’s statement.
In doing so, the Chinese firms again established themselves as key emergency lenders in the Indian market, not only allowing Ambani to redeem his convertible debt, but to salvage the entire Indian market for similar securities:
“If Reliance Communications had defaulted, the whole Indian convertible market would have collapsed,” Raj Kothari, a convertible trader at Sun Global Investments Ltd. in London, said in a telephone interview. “Sentiment has improved in Indian convertibles and we are seeing buying interest from investors.”
The article details Ambani’s past financial links to Chinese firms and Reliance’s financial issues, but the idea that the Indian convertible market is that fragile is even more broadly concerning.