Moody's turns negative on RCom as asset sale gets delayed

Moody's Investor Service has changed Reliance Communications Limited's ratings to negative from stable on April 7. The ratings agency believes that the expectation of a material improvement in the Indian telecommunications company's leverage, liquidity and refinancing pressure is unlikely to materialise over the next six to nine months, even if the company announces a binding tower sale transaction this quarter.

The outlook change comes after a persistent delay in the company's planned non-core asset sales, which underpin its deleveraging strategy. Moody's expects the valuation of the tower transaction could be 20-25 per cent lower than its earlier estimates of $3.4 billion.

Analysts at Moody's further state that RCom continues to have a weak liquidity profile, and remains reliant on recurring covenant waivers from banks due to its high leverage. The telecom company has $450 million (Rs 2,600 crore) of debt maturing in the current quarter ending June 2016. This includes a $350 million ECB facility at Reliance Infratel Limited, which is guaranteed by RCom and has a cross-default with other debt.