Fitch Ratings downgrades RCOM further

Fitch Ratings has downgraded Reliance Communications’s (RCom) long term foreign and local currency issuer default ratings (IDRs) to ‘CCC’ from ‘B+’.

Fitch has also downgraded the rating on RCom’s $300 million 6.5% senior secured notes, due 2020, to ‘CCC/RR4’ from ‘B+/RR4’. The rating watch ‘negative’ on the IDRs and notes, which has been in place since December 2016, has been removed, the agency said.

RCom’s rating downgrade reflects Fitch’s belief that some kind of default is a real possibility. EBITDA declined by 30% to Rs 4,900 crore in the financial year ended March 2017 (FY17) from Rs 7,100 crore in FY16, and is likely to be insufficient in the current financial year to meet annual interest costs of Rs 3,500 crore and maintenance capex of Rs 1,500 crore.

At end-March 2017, liquidity was poor with cash and equivalents of Rs 1,400 crore — insufficient to pay short-term debt of Rs Rs 10,900 crore, the rating agency said.