Cell C has slammed an announcement by Moody's Investor Service that the third mobile operator will default on an $805 million (R5.7 billion) debt within the next year.
Last week, Craig Jamieson, GM of Moody's SA, said Cell C was close to defaulting on R5.7 billion bonds, as the company failed to generate enough cash to pay interest on the debt. The investor service downgraded Cell C's credit rating on 21 May.
However, the third cellular operator says it is able to meet its current and future interest payments on the high yield bonds.
"Our business plan makes full provision for the repayment of cash interest on our bonds. In addition, we have unrestricted access to a Nedbank revolving credit facility of R600 million, as well as a commitment of financial backing from our principal shareholder," explains Cell C chief financial officer Muhieddine Ghalayini.
Ghalayini says the statement issued by Moody's last Thursday is factually incorrect and misleading.
"While we understand that Moody's, as an independent rating agency, is entitled to make views on our financial position, we believe these views should be based on the latest available financial information and forecasts, as well as interaction with ourselves," he says.
Ghalayini also argues that Moody's elected to make the above statement based on an analysis that Cell C does not agree with. It made no attempt to verify the facts upon which it built its model and argument, he says.
Earlier this year, Cell C said it was on an upswing and expected to double its earnings before interest, taxes, depreciation and amortisation by 2010. The company also said it would double its subscriber base to 6.75 million subscribers within the same period.
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