Cell C credit rating cut to D by S&P on missed interest payments

South Africa’s third-largest wireless carrier, Cell C, had its credit rating cut to D by rating agency S&P Global after it failed to make interest payments due in July.

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 on Thursday.

Cell C suspended the payments as part of an effort to recapitalise the company and increase liquidity, chief executive officer Douglas Craigie Stevenson said in an interview in Cape Town on Thursday. Deloitte & Touche has been appointed to determine the correct capital structure for the business, he said.

“We are in talks with our lenders to work on our debt profile,” Craigie Stevenson said. “We plan to complete a recapitalization of the business by the end of the year, if all goes according to plan.”

The company, based in Johannesburg, is struggling to service an almost R9bn debt load. Though a stake stale to Blue Label Telecoms in 2017 helped it cut borrowings, the company is still struggling. S&P reduced the rating from selective default and warned that missing the interest payments could trigger demands for accelerated payments the ratings company said. The company probably won’t be able to meet those obligations, it said.

S&P downgraded Cell C to default in February 2017 after the carrier missed interest payments in January of that year.

In the meantime, Cell C is working on creating an expanded roaming agreement with the MTN Group, Africa’s largest mobile phone company by sales, Craigie Stevenson said. It’s also seeking funding from a South African investment company known as the Buffet Group.

“We are making 15 billion rand in revenues a year, the company needs to be profitable,” said Craigie Stevenson. “Part of the focus is to cut out unnecessary costs.”

* This article was updated with Cell C CEO comments from interview