Gloom hangs over Cell C rescue plan

10 February 2017

Telecoms

The downgrade of Cell C’s corporate credit rating to the junkiest of junk by S&P Global Rating is another blow to the telecommunications company’s brave ambition of reducing its crippling debt load, analysts say.

The downgrade of Cell C’s corporate credit rating to the junkiest of junk by S&P Global Rating is another blow to the telecommunications company’s brave ambition of reducing its crippling debt load of R20.7bn.

This is the view of market watchers after S&P Global Ratings downgraded Cell C’s credit rating on Monday after it missed interest payments in January on its €400m senior secured bonds that are due in 2018.

The credit rating of South Africa’s third-largest mobile operator has been lowered to “D”, the lowest “junk” level rating on S&P’s scale, from “CC” or highly vulnerable to nonpayment — a move that will make it expensive for Cell C to return to the bond market to raise capital.

Cell C’s missed interest payments also prompted S&P Global Ratings to flag constraints to its liquidity due to delays in its long-touted capital restructure.

The company is in the middle of its capital restructure plan involving shareholders, among them prepaid technology specialist Blue Label Telecoms, which is in the process of buying a 45% stake in Cell C.

Blue Label Telecoms, through its spokesman, said it would revert to the market on its participation in Cell C’s recapitalisation by the end of February, thus declining to comment on S&P’s downgrade.

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Source: Moneyweb 8 February 2017