RCom ratings remain under review for downgrade: Moody’s
RCom ratings remain negative because of demerger of its wireless business with Aircel, pending structural reorganisation and recalibration of credit risk of bondholders
New Delhi: A day after Reliance Communications Ltd (RCom) announced the signing of a binding agreement with Brookfield Infrastructure Partners to sell its tower business, Moody’s Investors service said RCom’s ratings remain under review for downgrade.
“Moody’s Investors Service says that Reliance Communications Limited’s (RCOM) B1 corporate family and senior secured ratings remain on review for downgrade despite signing a binding agreement with Brookfield Infrastructure (unrated) in relation to the sale of RCOM’s tower assets,” Moody’s said on Thursday.
The rating agency said that even as signing of the agreement is credit positive, the ratings remain negative because of demerger of its wireless business with Aircel Ltd, the structural reorganisation that will happen as a result of sale of tower business and recalibration of credit risk of bondholders.
Both the tower deal and the demerger of wireless business is subject to approvals from bondholders and regulatory compliances and could take up to 6-9 months.
Moody’s also said there is a lack of clarity in RCom’s cash flow generating strategy of its remaining businesses—enterprise and fiber optic businesses.
The transactions announced by RCom are under review along with the credit quality and financial strength of the remaining businesses and the effect of restructuring on bondholders.
RCom on Wednesday said it has signed a binding agreement with Brookfield Infrastructure Partners to sell its tower business for an upfront payment of Rs11,000 crore in cash on completion of the transaction. RCom will receive class B non-voting shares in the newly-acquired tower business from Brookfield.
The company is burdened with a debt of about Rs42,000 crore which it expects will drop down to Rs17,000 crore due to demerger of wireless business and sale of tower assets.
On Monday, rating agency Fitch downgraded RCom’s ratings to B+ and put the company under review.