Will Cell C default?

ADSL South Africa (Broadband South Africa), 4 July 2007

This is the question one can ask after Moody’s Investor Service announced that Cell C ‘…will default on an $805 million (R5.7 billion) debt within the next year’ (Cell C slams Moody’s, Damaria Senne, ITWEB, 25 June 2007).

‘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’ (Cell C slams Moody’s, Damaria Senne, ITWEB, 25 June 2007).

In other words, according to Moody’s Investor Service Cell C is in serious financial trouble.

What was Cell C’s response to the announcement?

Cell C labelled Moody’s announcement as ‘…incorrect and misleading’ (Cell C slams Moody’s, Damaria Senne, ITWEB, 25 June 2007).

Chief Financial Officer of Cell C, Muhieddine Ghalayini, responded: “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” (Cell C slams Moody’s, Damaria Senne, ITWEB, 25 June 2007).

In other words, Cell C says ‘…it is able to meet its current and future interest payments on the high yield bonds’ (Cell C slams Moody’s, Damaria Senne, ITWEB, 25 June 2007).

Also: “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” (Cell C slams Moody’s, Damaria Senne, ITWEB, 25 June 2007).

In other words, Cell C is certainly not happy about Moody’s modus operandi.

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