Fitch Lowers RCom to B+, placed its IDRs on watch Negative, stock falls

KOLKATA: Rating agency Fitch has downgraded India’s No 4 carrier, Reliance Communications’ long-term foreign and local currency Issuer Default Ratings (IDRs) to B+ from BB-.

The rating agency has also downgraded the rating of RCom’s $300 million 6.5% senior secured notes due 2020 to B+ from BB- and assigned a Recovery Rating of RR4 to the notes.

The RCom stock was down 3.2% at Rs 34.90 on BSE in late trade Tuesday.

“The downgrade reflects that our expectations that the group’s (read: RCom) funds flow from operations (FFO)-adjusted net leverage will not fall below 4.5x for the forseeable future,” Fitch said in a media statement Tuesday.

It added that RCom’s plans to demerge its wireless business into a 50:50 JV and sell 51% of its tower business, Reliance Infratel, “would be negative for the company’s creditors, even if receipts from the tower transaction are used to pare down debt”.

Fitch has also placed RCom’s IDRs and senior secured notes on Rating Watch Negative (RWN), which reflects that approvals from the Anil Ambani-led telco’s bondholders and various authorities are required before the transactions can be completed, which may take more than six months.