Facing a severe liquidity crisis and the possibility of breaching long-term loan covenants, Tata Communications has approached the government, which is a 26 per cent partner in erstwhile VSNL, for changes in shareholders agreement to raise additional funds.
The company has requested the Department of Telecom (DoT) to consider relaxation of the provisions that puts a cap on the total indebtedness of the company vis-à-vis its networth, a move that would allow Tata Communications to raise additional funds.
In a communication to DoT, the company is believed to have stated that the covenants on long-term loans are likely to be breached in January 2009 and the period from January to March is going to be a serious challenge.
The note said that the next financial year (2009-10) is going to be nearly impossible without additional non-debt funding. TCL has approached its major stakeholders -- the government and the Tata Sons -- for the rights issue to raise up to Rs 1,000 crore and the more funds through debts. Last week, the company had said that besides the Rs 1,000-crore rights issue, Rs 2,000 crore would be raised through debt, to finance acquisitions in the US and the UK and bid for spectrum for wireless broadband.