November 1, 2017 / 2:32 AM / a year ago

Fitch: Ratings on RCom, GCX Unaffected by RCom Debt Revamp Plan

(The following statement was released by the rating agency) SINGAPORE, October 31 (Fitch) The ratings on Reliance Communications Limited (RCom, Restricted Default) and its wholly owned subsidiary Global Cloud Xchange (GCX, B-/Negative) will be unaffected by Rcom's debt restructuring plan, Fitch Ratings says. We expect to re-rate Rcom once there is clarity on the execution of sale of its assets and the capital structure of the reorganised entity. GCX's ratings are driven by its relatively weak trading position and its liquidity; reduction of its cash balance to below USD40 million could lead to negative rating action. On 30 October, Rcom announced a plan to restructure its INR458 billion (USD7 billion) of debt. It plans to convert debt of INR70 billion into equity, sell spectrum, tower and fibre assets for INR170 billion, and sell real estate of INR100 billion. Rcom owns about 125 acres (50.5 hectares) of land in Dhirubhai Ambani Knowledge city (DAKC), in Mumbai, India and other real estate assets across eight cities in India. It plans to monetise spectrum assets in the 800MHz, 900MHz, 1800MHz and 2100MHz bands by sharing and trading with other Indian telcos, most likely Reliance Jio, which is owned by Reliance Industries Ltd (BBB-/Stable). Rcom also owns 43,000 towers and 178,000 route km of inter- and intra-city fibre optic cables. Rcom's lenders will convert INR70 billion of debt into equity and will invite a strategic investor to inject equity before the end of 2017 and manage the remaining businesses. Rcom continues to be in a standstill agreement with its lenders until end-2017. We rate Rcom's USD300 million senior secured bond due 2020 at 'C' with Recovery Rating of 'RR4'. We believe that once lenders take more than 51% stake in Rcom from the Anil Dhirubhai Ambani Group (ADAG), the change of control clause in the bond documents will be triggered and bondholders can accelerate the bond repayment. ADAG group will retain about 26% of shareholding after the debt restructuring. Rcom expects the debt-to-equity conversion to happen before the end of 2017, although lenders would require their respective boards' approvals to convert debt into equity. We expect Rcom to gradually exit from the wireless voice business and significantly scale down its operations due to intense competition. It announced that it will focus on offering 4G services as a mobile virtual network operator after selling its spectrum assets. Rcom called off its plan to merge its wireless operations with Aircel Ltd, owned by Malaysia's Maxis Berhad, citing regulatory and competitive reasons. Rcom said that its plan to sell 51% stake in its tower operation to Canadian pension fund Brookefield for INR110 billion may now fetch lower value because it plans to shrink its wireless business and the absence of merger with Aircel. We expect the restructuring to transform RCom from an integrated telecom company to a business-to-business bandwidth services provider with three segments - GCX, enterprise and data centre business. However, the post-restructuring Rcom will not benefit from GCX's cash flows, which are largely ring-fenced under its USD350 million senior secured bond documents. We expect GCX's end-September 2017 cash balance to fall closer to USD40 million - the threshold below which we will consider negative rating action. We expect its indefeasible right of usage sales to be below USD25 million during the six months ended September 2017 - lagging management's expectations of USD64 million for the full year to 31 March 2018. GCX's undrawn revolving credit facility of USD30 million has lapsed. Its only debt is the USD350 million bond, which is due in August 2019 and the next coupon payment is due in February 2018. Contact: Nitin Soni Director Corporates +65 6796 7235 Fitch Ratings Singapore Pte Ltd. One Raffles Quay South Tower #22-11 Singapore 048583 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email:; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below