RCom bonds fall to record low on rating downgrade

The shares and bonds of Reliance Communications Ltd. (RCom) , the wireless telecom carrier controlled by Anil Ambani, fell to a record low after credit rating agencies ICRA and CARE cut their rating on the company’s debt on worries of its dollar-denominated debt.

This week the RCom bonds plunged 18 per cent and the RCom stock fell as much as 9.6 per cent to Rs 25.30, which is lowest since trading in the stock began in 2006.

Last week, CARE downgraded its rating on RCom's long-term bank facilities and non-convertible debentures as it cited increased competition, high debt levels and lower cash accruals.  This month, ICRA Ltd. downgraded its rating with a negative outlook, citing weakening prospects for revenue generation and profitability.

High debt levels of RCom along with lower cash accruals and imminent debt repayments increases the stress on the liquidity situation as well as the risk profile of the company.

On Wednesday, the RCom stock touched a record low of Rs 25.30 and closed at Rs 25.85, down by Rs 2.15, or 7.68 per cent from its previous close on the BSE.