Debt reduction delay straining RCom's credit profile: Moody's

Delay in deleveraging plans specially mobile tower sale to reduce debt is keeping financial and credit profile of Reliance Communications strained, rating firm Moody's Investors Service said in a report.
"...Changes in the company's strategy continue to delay execution of its plans. Hence, any tangible benefit to RCom's financial and credit profile will now be delayed for at least 6-9 months.
"The negative outlook reflects our view that ongoing delays in RCom's rollout of its deleveraging plans will keep its financial and credit profile strained over the near term," Moody's Vice President and Senior Analyst Nidhi Dhruv said.
RCom net debt increased to Rs 41,362.1 crore in 2015-16 from Rs 36,725.7 crore in the preceding fiscal.

Moody's Investors Service has counted RCom's financial performance in 2015-16 under Ba3 corporate family rating and senior secured rating with the ratings outlook remains negative.
As per the report RCom has about USD 450 million (about Rs 3,000 crore)in debt falling due in the quarter ending 30 June 2016, which includes a USD 350 million (about Rs 2,350 crore) ECB facility at Reliance Infratel (unrated), which is guaranteed by RCom and has a cross-default with other debt.

Moody's report said that RCom also continues to have a strained liquidity profile, with the company remaining reliant on recurring covenant waivers due to its high leverage. There is also an ongoing need to refinance upcoming debt maturities.

"Management is still in the process of renewing this facility with the banks and expects to complete the refinancing ahead of maturity. Failure in obtaining final renewal approvals from the banks will lead to imminent ratings downgrade, which would be more than one notch," the report said.
It said that in December 2015, the company announced that it had entered into exclusive discussions with Aircel for a potential combination of businesses and the deal has yet to close. RCom has extended the exclusivity period for its discussions with Aircel by another 30 days to June 22, 2016.
Further, RCom has not able to close its mobile tower sale deal for which it entered in to discussion with Tillman Global Holdings, LLC and TPG Asia in December.

"RCom has also re-prioritised its strategies again, and now plans to announce the final binding tower sale transaction within two months from the completion of discussions with Aircel. This is a significant delay from our earlier expectations for the tower transaction to be confirmed within the June quarter," Dhruv said.
It also said on the completion of the share swap transaction with Sistema Shyam Teleservices, RCom will have adequate spectrum.
"However, should the company participate in the upcoming spectrum auctions, its leverage metrics will be further pressured," the report said.