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BRIEF-Fitch downgrades Reliance Communications to 'CCC'
June 1, 2017 / 7:59 AM / 7 months ago

BRIEF-Fitch downgrades Reliance Communications to 'CCC'

June 1 (Reuters) -

* Fitch downgrades reliance communications to ‘CCC’

* Fitch- Also downgraded rating on Rcom’s USD300 million 6.5% senior secured notes due 2020 to ‘CCC/RR4’ from ‘B+/RR4’

* Fitch- Rating watch negative on IDRS and notes has been removed on Reliance Communications

* Fitch- Rcom’s rating downgrade reflects Fitch’s belief that some kind of default is a real possibility

* Fitch- Believe that Rcom may struggle to refinance its maturing short-term debt given declining EBITDA and delays in executing asset sales

* Fitch- Believe that Rcom’s business model is compromised due to fierce price competition in Indian mobile market

* Fitch- Rcom’s capital structure is unsustainable as fy17 FFO-adjusted net leverage was over 9.0x and do not expect that operating cash flows will improve

* Fitch- Rcom’s market position is weak and it has limited financial flexibility to invest to strengthen its position or step-up marketing costs

* Fitch- Have a negative outlook on Indian Telco market

* Fitch- Expect credit profiles of top-four Telcos to come under pressure from tougher competition and larger capex requirement

* Fitch- Rcom’s size, scale and diversity will be much smaller should company complete sale of its tower business and demerge wireless unit as planned

* Fitch- Weakening cash generation from core wireless business may hamper plan to demerge wireless business into 50:50 jv and sell 51% of tower business Reliance Infratel

* Fitch- Even if transactions happen and debt is paid down, believe residual business is likely to be saddled with too much debt

* Fitch on Rcom- Do not believe that FY18 EBITDA will be sufficient to cover its annual interest cost and maintenance capex requirements Source text for Eikon: Further company coverage:

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