S&P drops Cell C to SD, notes to CC

S&P said it lowered its long-term corporate credit rating on Cell C (Pty) Ltd. to SD (selective default) from B.

The agency also downgraded the issue rating on Cell C's €400 million senior secured notes due 2018 to CC from B. The recovery rating is unchanged at 3, reflecting an expectation of recovery in the lower half of the 50%-70% range, in the event of a conventional default.

In addition, S&P withdrew its ratings on Cell C's proposed senior secured notes that were never issued.

S&P said the downgrade reflects the delay of Cell C's refinancing assumed in its last update where a ZAR 8.5 billion (about $600 million) equivalent bond was to be raised in U.S. dollars. The bond issuance would have been followed by an equity investment of ZAR 16 billion from 3C Telecommunications (mainly owned by Oger telecom), Blue Label Telecoms and Cell C's management and staff.

Currently, Cell C and its shareholders are revising the company's refinancing structure.

The delayed refinancing has put pressure on Cell C's liquidity, and S&P said it understands that the company has missed principal payments on two tranches of unrated debt, though it continues to service interest on all its unrated debt and to its bond holders under the €400 million senior secured notes.

There has been no acceleration of debt after the company secured waivers from affected lenders.

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