S&P further downgrades Cell C
Ratings agency S&P Global Ratings has downgraded mobile operator Cell C after it failed to make interest payments on certain bilateral loan facilities that were due in July.
Its decision was also based on the company’s suspension of future interest payments pending the conclusion of its operational and balance sheet restructuring.
Cell C’s rating has now been lowered from 'SD' (selective default) to 'D' (default) and the group’s senior secured term loan from 'CC’ to 'D'.
“We believe there is an increased likelihood that Cell C will be unable to repay all or substantially all of the obligations as they come due, unless it is able to restructure its debt and recapitalise its balance sheet,” S&P said in a statement.
In June, considerable short-term liquidity and refinancing risks led S&P to downgrade Cell C to 'CCC-', with a developing outlook, which reflected the possibility of the agency raising or lowering the rating in the next few quarters depending on Cell C's negotiations with the Buffet Consortium.
Cell C, weighed down by R9-billion debt, is currently in discussions with lenders, noteholders and shareholders regarding implementation of both the operational and balance sheet restructuring as part of the Buffet Consortium recapitalisation transaction.
Newswire Bloomberg quoted Cell C CEO Douglas Craigie Stevenson as saying that the suspension of payments formed part of its recapitalisation efforts and to increase liquidity.
“We are in talks with our lenders to work on our debt profile. We plan to complete a recapitalisation of the business by the end of the year, if all goes according to plan,” Bloomberg quoted the CEO as saying, post the downgrade this week.
Blue Label, which holds a 45% interest in Cell C and whose share price has been battered owing to Cell C’s struggles, previously assured the market that the transactions expected to resolve Cell C’s liquidity position were at an advanced stage.
The Buffet Consortium’s plans to potentially become a minority shareholder could bolster Cell C's balance sheet and ensure its sustainability.
“Cell C [also] recently announced a nonbinding term sheet to extend its national roaming agreement with mobile network operator MTN Group, which we understand is a major condition precedent for this transaction,” S&P said.
Cell C has finalised a term sheet detailing a further national roaming agreement with MTN, which is said to be mutually beneficial to both parties.
“This agreement lays the groundwork for a broader national roaming agreement, supporting the policy goals of avoiding network duplication and the burden on the environment, where shared infrastructure drives efficiencies in the delivery of services to consumers,” said Craigie Stevenson at the time.
Under the terms of the agreement, Cell C will be able to manage its network capacity requirements in a more scalable and cost-efficient manner.
“Nonetheless, we believe there are still various steps that need to be completed prior to recapitalisation, including the signature of a binding long-form agreement with MTN, possibly shareholder and regulatory approvals, and the restructuring of bilateral facilities,” S&P concluded.
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