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Announcement:

Moody's: Refinancing risk intensifies as GCX's bond maturity draws closer; credit negative

02 Aug 2018

Hong Kong, August 02, 2018 -- Moody's Investors Service says that refinancing risk for GCX Limited (B3 negative) is rising with the approach in a year's time of the maturity of its $350 million senior secured bond on 1 August 2019, a credit negative.

"GCX's refinancing risk is significant in the ongoing absence of a definitive refinancing plan -- particularly as its bond matures in one year -- while its parent's restructuring is yet to be completed and is another risk. These risks continue to constrain its ratings, despite a stable operating performance and moderate financial leverage," says Annalisa DiChiara, a Moody's Vice President and Senior Credit Officer.

In parallel, GCX continues to pursue non-capital market refinancing solutions that are independent of the parent's restructuring and at the same time lenders to RCOM continue to negotiate the terms of the sale of GCX with interested buyers.

The company expects that a definitive solution on either front - without loss to bondholders - could materialize by 27 August 2018, which would be credit positive.

GCX is a wholly owned subsidiary of Reliance Communications Limited (RCOM) through an intermediary holding company, Global Cloud Xchange Limited (GCXL).

GCXL is 100% owned by RCOM which is under the strategic debt restructuring process agreed with the Joint Lenders' Forum (JLF) since June 2017. RCOM's debt resolution plan that was agreed with its lenders on 26 December 2017 is yet to close.

While RCOM has remained in a debt standstill since June of 2017, GCX has remained current on its debt service obligations, including the $12.25 million due on 1 August 2018, which was paid from cash on its balance sheet.

Still, the negative overhang from RCOM's ongoing restructuring process continues to weigh on GCX's credit profile.

"GCX's B3 CFR and negative outlook continue to reflect a heightened level of refinancing risk, given that GCX's access to the capital markets remains curtailed by its parent's ongoing debt restructuring," adds DiChiara.

In addition, GCX's rating considers the uncertainty associated with the outcome of its parent's restructuring process, which will influence its future ownership and business and financial profiles.

According to the Reserve Bank of India's (RBI) revised framework for companies -- like RCOM - currently in default, the lenders have until 27 August, 2018 (which is 180 days from the reference date of 1 March, 2018) to implement and complete any restructuring plan.

In the absence of a resolution plan, the lenders are required to initiate proceedings against the defaulting company under the Insolvency and Bankruptcy Code 2016 within 15 days from August 27, 2018.

As a wholly-owned subsidiary of RCOM, this development could expose GCX to RCOM's liquidation process should RCOM and its lenders fail to complete a restructuring by 27 August 2018.

Given the RBI's deadlines, the absence of a definitive refinancing plan or binding sales agreement for GCX to a third party by 27 August would be credit negative.

For year-end 31 March 2018, GCX generated EBITDA of $117million and cash EBITDA of $82.9 million. The company executed new Indefeasible Rights of Use (IRU) contracts of $55.8 million and had $46.7 million in cash on its balance sheet.

GCX management provided guidance during its Q4 earnings call for new IRU contracts of $70 million for year-end 31 March 2019, of which $55 million of this amount was contracted for as of 30 June 2018.

The principal methodology used in these ratings was Communications Infrastructure Industry published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

For additional information please refer to the associated Issuer Comment on GCX Limited available on www.moodys.com

GCX Limited provides data connectivity solutions to major telecommunications carriers and large multinational enterprises in the US, Europe, Middle East and Asia Pacific, which need multi-national IP-based solutions and connectivity.

GCX Limited incorporated in Bermuda on March 19, 2014 -- held through intermediate holding companies Global Cloud Xchange Limited (GCXL) and Reliance Globalcom BV (RGBV) -- is ultimately a wholly owned subsidiary of RCOM.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Annalisa Di Chiara
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

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