Rating agency Fitch affirmed Reliance Communications' long-term foreign-and local-currency issuer default ratings (lIDR) of 'BB-', indicating a stable outlook. It simultaneously affirmed the 'BB-' rating on the Anil Ambani-led telco's $300 million 6.5% senior secured notes due 2020.
The affirmation factors in RCom's commitment to deleverage in a timely manner by using the proceeds from the sale of its tower business by its subsidiary, Reliance Infratel, Fitch said, added that the RCom management has committed to repay a part of its $6.1bn of debt and to achieve a target debt/EBITDA of below 3.0x by end-March 2017.
“We would likely downgrade the rating if the company is unable to demonstrate in a timely manner that it has the ability to pay down debt such that FFO-adjusted net leverage will fall to below 4.5x,” the ratings firm said.
The firm said that the asset sale will support its rating. Rcom has a non-binding arrangement to sell Infratel's tower business to Tillman Global Holdings, LLC and TPG Asia, Inc.
“Should this transaction proceed and sale proceeds are used to pay down debt, Rcom's FFO-adjusted net leverage could improve to below 4.0x as the indicative enterprise value will more than offset the additional lease-adjusted debt,” the firm said.
Apart from the sale of tower business, Rcom is also considering deleveraging via a sale of its non-core assets, including its under-sea cable subsidiary Global Cloud Xchange, real estate and its pay-TV business. However, progress on these asset sales has been slow to date. Rcom's IDR is constrained by its weak market position as the fourth-largest telco in India with a revenue market share of around 8% and a subscriber base of mostly low-revenue customers.
