Reliance Communications Rejects Rating Downgrades By Moody’s, Fitch

Telecom operator Reliance Communications Ltd. on Wednesday rejected credit rating cuts by Moody's and Fitch, saying the views apply only on its $300 million bonds, which are being serviced regularly.

In May 2015, the company had issued 6.5 per cent coupon bearing U.S. dollar bonds, maturing in November 2020, for an aggregate amount of $300 million, it said in a statement.

RCom, in its notice to stock exchanges on May 24, 2017, had said that the company will continue to pay interest on the respective due dates, and the bonds will be repaid on the due date of November 6, 2020.

Rating agencies Fitch and Moody's on Tuesday downgraded credit rating of Reliance Communications for the second time in quick succession on account of its fragile liquidity position and limited ability to pay back debt.

Also Read: Reliance Communications Downgraded Again By Moody's And Fitch

Fitch downgraded RCom to the lowest category with some hope for recovery of principal or interest amount, while Moody's Investors Service downgraded the firm to the second lowest category.

Moody's downgraded RCom corporate family rating and senior secured bond rating to Ca from Caa1.

"The outlook is negative," Moody's said in a statement.

Credit rating indicates capability of a company to pay back debt. Moody's rate firms in nine categories ranging from Aaa to C. Ca rating indicates that obligations in this category are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

Also Read: Everything You Need To Know About Reliance Communications' Default Rating

Fitch Ratings has downgraded Reliance Communications Limited's (RCom) Long-Term Foreign- and Local- Currency Issuer Default Ratings (IDR) to 'RD' from 'CCC'.

It also downgraded the rating on RCom's USD 300 million 6.5 percent senior secured notes due 2020 to 'C/RR4' from 'CCC/RR4'.

The RD (restricted default) category is too level down from CCC category. The RD indicates that the firm has an uncured payment default on a bond, loan etc but has not entered into bankruptcy liquidation, or other formal winding- up procedure and continues to operate.

The C category of Fitch is the lowest in its credit rating and RR4 symbol indicates that average recovery prospects of current principal and related interest is in the range of 31-50 percent.

As per Moody's, RCom's consolidated debt levels continued to rise through year-end resulting in reported debt to EBITDA ratio of 8.5 times.

RCom said that the recent positive development of the standstill period agreed by our lenders appears to have been viewed negatively by the rating agencies on certain technical grounds, while in actual fact the same directly addresses their key concerns about the short term liquidity situation.

“It may also be noted that the in the year 2012, the company had redeemed its Foreign Currency Convertible Bonds (FCCBs) aggregating $ 1 billion on the specified due date on maturity, at full redemption value, without a day's delay, despite severe volatility in global markets at that time,” RCom said.

Also Read: Reliance Communications Gets Time Till December To Repay Debt