Debt reduction delay straining RCom's credit profile: Moody's

New Delhi, Jun 3 () Delay in deleveraging plans specially mobile tower sale to reduce debt is keeping financial and credit profile of Reliance Communications strained, rating firm Moody's Investors Service said in a report. "...changes in the company's strategy continue to delayexecution of its plans. Hence, any tangible benefit to RCom'sfinancial and credit profile will now be delayed for at least6-9 months."The negative outlook reflects our view that ongoingdelays in RCom's rollout of its deleveraging plans will keepits financial and credit profile strained over the near term,"Moody's Vice President and Senior Analyst Nidhi Dhruv said.RCom net debt increased to Rs 41,362.1 crore in 2015-16from Rs 36,725.7 crore in the preceding fiscal.Moody's Investors Service has counted RCom's financialperformance in 2015-16 under Ba3 corporate family rating andsenior secured rating with the ratings outlook remainsnegative.As per the report RCom has about USD 450 million (about Rs3,000 crore)in debt falling due in the quarter ending 30 June2016, which includes a USD 350 million (about Rs 2,350 crore)ECB facility at Reliance Infratel (unrated), which isguaranteed by RCom and has a cross-default with other debt.Moody's report said that RCom also continues to have astrained liquidity profile, with the company remaining relianton recurring covenant waivers due to its high leverage. Thereis also an ongoing need to refinance upcoming debtmaturities."Management is still in the process of renewing thisfacility with the banks and expects to complete therefinancing ahead of maturity. Failure in obtaining finalrenewal approvals from the banks will lead to imminent ratingsdowngrade, which would be more than one notch," the reportsaid.It said that in December 2015, the company announced thatit had entered into exclusive discussions with Aircel for apotential combination of businesses and the deal has yet toclose. RCom has extended the exclusivity period for itsdiscussions with Aircel by another 30 days to June 22, 2016.Further, RCom has not able to close its mobile tower saledeal for which it entered in to discussion with Tillman GlobalHoldings, LLC and TPG Asia in December."RCom has also re-prioritised its strategies again, andnow plans to announce the final binding tower sale transactionwithin two months from the completion of discussions withAircel. This is a significant delay from our earlierexpectations for the tower transaction to be confirmed withinthe June quarter," Dhruv said.It also said on the completion of the share swap transaction with Sistema Shyam Teleservices, RCom will have adequate spectrum. "However, should the company participate in the upcomingspectrum auctions, its leverage metrics will be furtherpressured," the report said. PRSABI