Reliance Communications led by Anil Ambani have rejected all the downgrades made Moody’s and Fitch the other day, which resulted in the company’s shares go down by 4 percent, making the operator’s losses to 38 percent in the last month.
RCom urges that the ratings by “Moody’s and Fitch apply only to these USD bonds. 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.”
“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 ~USD 4 billion i.e. by ~ 60% within the next few months,” said the company is a press statement.
Both these negative ratings from Moody and Fitch resulted in the company’ share price drop. RCom also says that these claims are unnecessary because the company has already received a seven-month respite from the bankers to clear the debt.
RCom following receipt of the respite from bankers said that “There will be a standstill on the company’s debt servicing obligations for the next seven months till end December 2017. In the event the transactions are not completed in the above timeframe, the Lenders may exercise their right to convert their debt, in accordance with applicable SDR guidelines.”
In May 2015, RCom issued a 6.5 percent coupon bearing USD bonds, maturing in November 2020, for an aggregate amount of USD 300 million. These bonds constitute ~4 percent 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 the company will continue to pay interest on the respective due dates, and the Bonds will be repaid on the due date of November 6, 2020
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 fact the same directly addresses their key concerns about the short-term liquidity situation quoted a spokesperson of RCom.
It may also be noted that the in the year 2012, the company had redeemed its Foreign Currency Convertible Bonds (FCCBs) aggregating USD 1 billion on the specified due date on maturity, at full redemption value, without a day’s delay, despite severe volatility in global markets at that time.
Currently, RCom is in the process of a demerger with Aircel and already announced that the merged entity will be called as ‘AirCom.‘