MUMBAI (May 30): Ratings agency Moody's Investors Service has downgraded Reliance Communications Ltd deeper into "junk" territory and kept its ratings under review for further
downgrade as the company struggles with a heavy
debt burden. Moody's said it had downgraded the Indian telecom operator's "corporate family rating and senior secured bond rating to Caa1 from B2". This implies that its obligations are speculative and subject to very high credit risk, according to Moody's website. RCom, controlled by billionaire Anil Ambani, has traditionally relied on short-term
debt and covenant waivers from its banking relationships, but if these waivers are **t received it could impact RCom's US$300 million bondholders "significantly", Moody's said. It also said that owing to intense mobile competition, there is ** scope for
RCom to deleverage. Meanwhile, India-focused ratings agency ICRA, a subsidiary of Moody's, also downgraded four
RCom debt instruments to D, which signifies instruments either in default or expected to be in default soon. These include its **n-convertible debentures (NCDs) and commercial paper programme. A**ther local rating agency, Care Ratings, downgraded the company's NCDs and other
debt instruments to default on Tuesday. RCom's shares haven fallen by 41.9 percent so far this month. During the same time the broader index has gained 3.4 percent. Its shares dropped again on Tuesday, after a sharp slide a day earlier, hurt by
concerns over its ability to service its loans.
RCom sought to reassure investors in its quarterly conference call on Monday, saying it was in talks with lenders to defer loan instalments coming due in the next four months. The firm plans to repay lenders 110 billion rupees (US$1.7 billion) and refinance an even larger chunk by end-September, if lenders sign off on the merger of its wireless segment with rival Aircel and sale of a majority stake in its tower unit to Canada's Brookfield.
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