Moodys lowers RComs credit rating

Moody's has downgraded credit rating of Reliance Communications from substantial credit risk scale to high credit risk scale on account of weak performance of the company.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney master your money IThe Winning Leap SME Special
Moneycontrol

Home » News » Business

Nov 30, 2016, 09.31 PM | Source: PTI

Moody's lowers RCom's credit rating

Moody's has downgraded credit rating of Reliance Communications from substantial credit risk scale to high credit risk scale on account of "weak performance" of the company.

Like this story, share it with millions of investors on M3

Moodys lowers RComs credit rating

Moody's has downgraded credit rating of Reliance Communications from substantial credit risk scale to high credit risk scale on account of "weak performance" of the company.

Post Your Comments

Share Cancel

| 1 Comments
Moodys lowers RComs credit rating
Moody's has downgraded credit rating of Reliance Communications from substantial credit risk scale to high credit risk scale on account of "weak performance" of the company.

"Moody's Investors Service has downgraded Reliance Communications Limited's (RCom) corporate family rating and senior secured bond rating to B1 from Ba3. At the same time, the ratings remain under review for further downgrade," Moody's said in a statement.

Obligations rated Ba are judged to be speculative and are subject to substantial credit risk while those rated B are considered speculative and are subject to high credit risk.

The number in front of these ratings indicate level of risk in the same scale with 1 indicating lower risk and 3 lower ranking within same scale.

"The downgrade to B1 from Ba3 reflects RCom's weak operating performance in first half of financial year 2017, as evidenced by the continued contraction in profitability through second quarter of 2017 - primarily at its Indian operations, the largest contributor - and the resultant rise in leverage, as measured by adjusted debt which now exceeds 7 times," Moody's Vice President and Senior Credit Officer Annalisa Di Chiara said.

The ratings remain under review for further downgrade, given the two material transactions-- combination of mobile business with Aircel and mobile tower sale deal, that the company has announced will likely result in a structural reorganisation across the group and a recalibration of the credit risk for bondholders, the agency said.

RCom expects its debt levels would fall by Rs 20,000 crore as it transfers bank debt and spectrum liabilities to the merged entity.

The company announced in October that it has entered in to a non-binding agreement for the sale of 100 per cent its tower assets and related infrastructure to Brookfield Infrastructure Group for Rs 11,000 crore.

Moody's said that it understands from Rcom that a definitive agreement for its tower sale deal will be signed by mid-December.

"While the expected reduction in debt achieved from these two transactions will be credit positive, it will take 6-9 months for both transactions to close. Moreover, this is a material shift with respect to business focus, scale and growth strategy -- key factors that affect the credit profile of the company and credit risk for bondholders," Moody's said.

The agency said that it understands that RCom will retain a 50 per cent interest in the wireless merger company and 49 per cent economic upside interest in the tower company subject to certain performance conditions.

"However, we do not believe that RCom's cash flows will benefit from dividends from either Merger Company or Tower Company for at least the first 12-24 months," the ratings agency said.

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login