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

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

Bs_logoA man opens the shutter of a shop painted with an advertisement of Reliance Communications in Mumbai
A man opens the shutter of a shop painted with an advertisement of Reliance Communications in Mumbai
BS Reporter Mumbai
Last Updated : Apr 13 2016 | 7:36 PM IST
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.

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First Published: Apr 13 2016 | 5:50 PM IST