New Delhi: The ratings on Reliance Communications and its subsidiary Global Cloud Xchange will be “unaffected” by the debt restructuring plan outlined by the company, according to Fitch Ratings.
Re-rating will happen after clarity on the execution of sale of its assets and the capital structure of the revamped entity, it added. Earlier this week, billionaire Anil Ambani-led Reliance Communications said lenders will convert part of their debt to equity to gain 51 per cent control of the company.
The debt-laden firm, which plans to shut mobile telephony business by November-end, will sell telecom tower and real estate businesses to pay off Rs 27,000 crore out of Rs 45,000 crore of loan on its books. Rcom said it has made a comprehensive “debt resolution plan to its domestic and foreign lenders”. “The ratings on Reliance Communications Limited (RCom, Restricted Default) and its wholly-owned subsidiary Global Cloud Xchange (GCX, B-/Negative) will be unaffected by Rcom’s debt restructuring plan,” Fitch Ratings said in a statement.
The ratings on GCX are driven by its “relatively weak” trading position and its liquidity, it said cautioning that reduction of its cash balance to below USD 40 million could lead to negative rating action. “We expect to re-rate Rcom once there is clarity on the execution of sale of its assets and the capital structure of the reorganised entity,” it added.
Fitch further said it expects Rcom to gradually exit from the wireless voice business and significantly scale down its operations due to intense competition. “We expect the restructuring to transform RCom from an integrated telecom company to a business-to-business bandwidth services provider with three segments – GCX, enterprise and data centre business,” the statement said.
But Fitch felt that even after the restructuring, Rcom will not benefit from GCX’s cash flows “which are largely ring-fenced under its USD 350 million senior secured bond documents”.