Moody's downgrades to RCom credit ratings to Ca

Moody's Investors Service has further downgraded telecom operator Reliance Communication's credit rating to the second lowest categaory Ca.
"Moody's Investors Service has downgraded RCom corporate family rating and senior secured bond rating to Ca from Caa1. The outlook is negative," Moody's said in a statement.
Credit rating indicates capability of a company to pay back debt. Moody's rate firms in nine categories ranging from Aaa to C.
Ca rating indicates that obligations in this category are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
"The downgrade reflects RCom's weak operating performance, high leverage and fragile liquidity position. The company's reported EBITDA has fallen 29 per cent year-over- year, evidencing its weak market position and contracting subscriber base," Moody's Vice President and Senior Credit Officer, Annalisa DiChiara said.

Moody's said the ratings are under review for further downgrade.

The C category, below Ca, indicates that a firm has defaulted on paying back debt and there is little prospect for recovery of principal or interest.
Moody's about a week back had downgraded RCom rating to Caa1 from B2.
RCom's net debt stood around Rs 45,000 crore as on March 31 this year. The lenders of the company have given it seven- month time to replay debt.
"At the same time, RCOM's consolidated debt levels continued to rise through year-end. The company reported total debt of Rs 45,700 crore at March 31, 2017, resulting in reported debt to EBITDA ratio of 8.5x. Including its reported Rs 3,320 crore of deferred payment liabilities, leverage increases further to over 9x," the statement said.

Moody's said that RCom has around Rs 23,000 crore short- term debt and current long term debt maturities through March 31, 2018.
"In addition, the company disclosed in its financial statements that it is still awaiting formal confirmation from lenders for waivers of certain loan covenants so the loan amount continues to be classified as a non-current liability. We believe failure to obtain could exacerbate near-term liquidity pressures," DiChiara said.
Historically, the company has relied on short-term debt and covenant waivers from its banking relationships, the statement said.
"Given the weak operating outlook and high competitive intensity of the Indian mobile sector, there is no scope for RCom to delever, absent the successful execution of its corporate restructuring," Moody's said.

The restructuring includes the sale of its mobile tower assets and the de-merger of its core wireless operations which it will merge with Aircel in a new joint venture.