RCom refuses to accept Moody’s and Fitch rating downgrades

Reliance Communications (RCom) has ‘respectfully’ rejected the latest ratings downgrades that rating agencies Moody’s and Fitch did a day earlier, which led to the shares of the telco falling nearly 4% at close.


The fall in shares accelerated the firm's losses in the past month to around 38%.

“We respectfully disagree with the recent rating actions by both these agencies, and believe that these rating actions do not reflect the servicing track record of the company,” said a statement from RCom, owned by Anil Ambani.

It added that the recent pact with its lenders, which allowed it a breather for seven months in terms of loan repayments, was viewed negatively on “certain technical grounds” by these rating agencies.

“In actual fact, the same (pact with lenders) directly addresses their (ratings agencies) key concerns about the short term liquidity situation,” the telco explained.

RCom argued that the rating agencies skipped giving due credit to the advanced stage of the two ongoing deals that it’s involved with, one being the merger of its wireless operations with Aircel and the other being the merger and sale of its stake in its tower unit. These deals would, as stated by the company, deleverage the company’s balance sheet by around $4 billion in the coming months.

It was on Tuesday that the International ratings firms Moody's Investors Service had cut its RCom rating to Ca from Caa1 which suggests that the debt is highly speculative and would most likely default, with some prospect of recovery of principal and interest.

Fitch Ratings too lowered RCom’s rating to RD from CCC, saying that the situation constituted a restricted default, given the multiple waivers or forbearance periods that have already been extended in parallel following a non-payment event.


(Image source Quint)