Ratings agency Standard and Poor’s (S&P’s) Global Ratings on Tuesday announced the downgrade of mobile operator Cell C after ongoing delays in concluding a restructuring agreement and missed interest payments on its senior secured bonds, as well as other unrated debt instruments.

The agency lowered Cell C’s long-term corporate credit rating from Selective Default (SD) to Default (D) and its issue rating on senior secured bonds due in 2018 to D from CC, as well as revising its recovery rating on the senior secured debt to '4' from '3'.

“The downgrade reflects our view that the delay in concluding the restructuring agreement continues to constrain Cell C's liquidity and that the company's decision to miss interest payments in January 2017 on its €400-million senior secured bonds due in 2018 is a default,” S&P’s said in a statement.

S&P’s expects to reassess Cell C's creditworthiness under its new capital structure if the company finalises the refinancing.

“Cell C had received waivers from its lenders for missing principal payments through January 2017 on its debt instruments, but it is now beyond the waiver period and has missed interest payments on its senior secured bonds,” the ratings agencies noted.

Cell C had not sought bankruptcy protection and S&P’s said it expects the operator will continue to operate and meet its nondebt obligations, including payroll and suppliers; however, S&P said the company currently relied on its lenders not exercising their acceleration rights as negotiations on a restructuring continue.

The revised recovery rating and lower recovery prospects are mainly the result of uncertainty over a potential buyer's ability to have unrestricted use of Cell C's spectrum, and the resulting impact to its value in a bankruptcy scenario.

“We value Cell C as a going concern, using a discrete asset valuation, because we think this best represents the value of the company's assets, both tangible and intangible,” it said.

“If the restructuring negotiations conclude successfully, we could revise our recovery ratings based on the new capital structure and ownership,” S&P’s concluded.