RCom’s GCX at risk of default; here’s why Fitch downgraded this Anil Ambani group company

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Published: January 28, 2019 2:42:42 PM

Fitch Ratings on Monday downgraded RCom-backed Global Cloud Xchange’s (GCX) long-term foreign and local currency Issuer Default Ratings (IDRs) to 'CC’ from 'CCC'.

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Fitch Ratings on Monday downgraded RCom-backed Global Cloud Xchange’s (GCX) long-term foreign and local currency issuer default ratings (IDRs) to ‘CC’ from ‘CCC’. The global agency also cut the ratings of undersea-cable provider’s $350 million 7 per cent senior secured notes to ‘CCC’ from ‘B-‘ due on August 1 this year.

“GCX has poor access to capital, due to the default and break-up of its parent, Reliance Communications Limited (Rcom),” Fitch Ratings said. The default appears to be in sight on account of  the delay in RCom’s exit from Strategic Debt Restructuring (SDR) plan due to the ongoing legal issues and reluctance of investors to offer fresh debt, it also said.

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“We believe that a prospective acquirer may be unwilling to buy GCX as long as its defaulted parent remains in the SDR process in India,” it noted.

Anil Ambani-owned RCom, in December 2017, had announced an asset-monetisation plan under which it talked about making exit from the SDR plan with a zero write-off to lenders. The company had also said that it would pare the debt by monetising its wireless business and selling land parcels at Dhirubhai Ambani Knowledge City (DAKC).

“Only a binding sale agreement to a stronger shareholder or a definitive agreement for new debt would be positive for the ratings,” Fitch also said.

Even though GCX’s management is mulling options to refinance the bonds, company may face challenges in doing this, the rating agency also said.

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