Ratings agencies assign stable outlook on RCom's $300mn debt

Ratings agencies Moody's and Fitch have assigned stable outlook on USD 300 million debt facility of telecom firm Reliance Communications.
While assigning a definitive Ba3 rating to the RCom's USD 300 million 6.50 per cent senior secured notes due 2020, Moody's said, "The outlook on the rating is stable."
Fitch assigned BB-/stable rating to these notes through which RCom raised funds last month.
Moody's Assistant Vice President and Analyst Nidhi Dhruv said that RCom's Ba3 rating reflects its meaningful market position as the fourth largest integrated mobile operator in India's growing telecom industry.
"The rating is constrained by Rcom's high leverage and strained liquidity profile, thereby weakly positioning it in its rating category. However, management has undertaken a deleveraging initiative that is premised largely on the monetisation of various non-core assets, alongside continued improvements in the operating performance," Dhruv said.

"Although the notes are secured, under our methodology for 'Country-Specific Treatment of Recovery Ratings', India is classed as a category D country, and, as such, the ratings of senior obligations in India are generally capped at same level as the IDR (Issuer Default Rating) , even if they are secured," Fitch said.

Fitch said Rcom's IDR is currently capped at 'BB-' given its market position as the fourth-largest telco in India, with a revenue market share of only 8 per cent in the USD 30 billion Indian telecom services industry.
Both the agencies said that RCom will use part of the note proceeds to fund the capital expenditure.

"Fitch's forecast for RCom's funds flow from operations (FFO)-adjusted net leverage of 4.8x for the financial year ended 31 March 2015 is much higher than for its Indian peers," the statement said.
Both the agencies have taken in to consideration deferred payment option opted by RCom for making spectrum payment that it won in March 2015 auctions.
Meanwhile, Reliance Communications today said its promoter entity Reliance Innoventures Pvt Ltd has pledged over 1.24 crore shares with Yes Bank.
Based on RCom share's closing price of Rs 60.65 on April 30, when the pledge was made, these shares were worth over Rs 75 crore.