Fitch downgrades GCX on refinancing risks

MUMBAI: Ratings agency Fitch has downgraded Global Cloud Xchange (GCX), citing refinancing risks as well as the woes of its parent Reliance Communications (RCom).

Fitch on Tuesday downgraded GCX’s issuer default rating to CCC from B-, while the one on the $350- million secured notes due 2019 was lowered to B- from B+, with a recovery rating of RR2. The issuer rating is based on a 'parent and subsidiary linkage methodology' and captures the “weak legal, operational and strategic linkages with its parent”, Fitch said, acknowledging that RCom may look to sell all or part of its stake in GCX.

RCom’s shares though surged 10.5% to Rs 30.10 Tuesday, a day after it sharply narrowed its losses in the quarter to December after shutting its wireless operations, and the company said it is likely to swing into profits in the quarter to March.


“GCX faces excessive refinancing risks around the $350-million secured notes due August 2019 due to uncertain trading conditions and the fall-out from the default and break-up of its 100% parent, RCom,” Fitch said.

“We believe that timely refinancing may be a challenge without greater certainty on the future relationship with RCom and clearer trading prospects,” it added.