S&P Global Ratings has lowered its rating on Cell C to SD (selective default) from CCC.
The downgrade comes after Cell C renegotiated the terms of certain aspects of its debt, with the backing of the applicable lenders.
S&P said that while no conventional payment or legal default event has occurred to date, it views the repayment profile restructuring as a distressed exchange.
This, the ratings firm said, is tantamount to selective default given Cell C’s weak liquidity position.
“Furthermore, because the schedule of agreed repayments has slowed, we believe lenders will receive less value than the promise of the original agreement,” S&P said.
“We also believe there was a realistic possibility of a conventional payment default before the exchange, given the company’s weak liquidity position.”
Cell C responds
Cell C said the recapitalisation and other related transactions will improve its liquidity and long-term competitiveness.
“The related measures will improve the efficiency of Cell C’s network, while decreasing capital expenditure,” it said.
In parallel, Cell C is implementing operational efficiency measures including leveraging its existing roaming agreement and right-sizing the business to remove inefficient costs.
This includes redirecting resources to revenue generating activities which will help to “position Cell C within the rapidly changing competitive environment in the mobile telecommunications industry”.
“In line with international trends, we are actively pursuing ways to leverage our existing roaming agreement,” said Cell C chief executive officer, Douglas Craigie Stevenson.
He added that they are looking at network synergy and consolidation to ensure that Cell C remains a competitive player with improved network access and quality.