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Reliance Communications on Wednesday said it disagreed with the recent rating actions by Moody’s and Fitch as these rating actions do not reflect the servicing track record of the company.
“We respectfully disagree with the recent rating actions by both these agencies, and believe that these rating actions do not reflect the servicing track record of the company,” RCom said. “The rating agencies have not given due credit to the advanced stage of the corporate transactions (Aircel merger and tower sale) which are expected to deleverage the company’s balance sheet by about $4 billion, that is, by about 60 per cent within the next few months.
Second time downgrade “It appears that the recent positive development of the standstill period agreed by our lenders has been viewed negatively by the rating agencies on certain technical grounds, while in actuality, the same directly addresses their key concerns about the short-term liquidity situation,” it added.
On Tuesday, Moody’s and Fitch had downgraded Reliance Communications for the second time in a week even after the telecom company announced a seven-month moratorium on debt repayment.
In May 2015, RCom issued 6.5 per cent coupon bearing US dollar bonds, maturing in November 2020, for an aggregate amount of $300 million. These bonds constitute about 4 per cent of the total debt of the company. The bonds have always been serviced regularly on the due dates and are fully current in servicing, as on date. The company had stated, vide its notice to stock exchanges dated May 24, 2017, that it would continue to pay interest on the respective due dates, and the bonds will be repaid on the due date of November 6, 2020.
While downgrading RCom, Fitch Rating said, “Under our rating definitions this situation constitutes a restricted default, as multiple waivers or forbearance periods have been extended in parallel following a non-payment event.”
“RCom had poor liquidity at end-March 2017, with cash and equivalents of ₹1,400 crore — insufficient to pay short-term debt of ₹10,900 crore,” it added.
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