Fitch and Moody’s have downgraded Liquid Telecom’s credit rating as the company nears a breach of its debt covenants.
Liquid has a R3.3 billion loan due in March 2026 with a debt covenant threshold of 3.5× net leverage. Fitch said Liquid’s corrective actions, which include a combination of reduced discretionary capital expenditure, better working capital management and operating efficiencies, and external funding, could enable a refinancing at par.
“We believe timely refinancing is contingent on material additional external funding, lower leverage, and positive operating cash flow, excluding Zimbabwe, after the impact of foreign exchange to service higher interest rates on new debt.”“Liquid Telecom had $57 million cash on its balance sheet, but $43 million of cash was drawn from the revolving credit facility at the end of the 2024 financial year,” it explained.
Fitch said it did not factor in the receipt of a second equity tranche as timing has not been confirmed by management, but it could provide an additional $34 million .It said it expected a default from factors such as higher competitive intensity, increased technological risk, loss of key contracts, adverse regulatory or political actions, or considerable currency depreciation in key geographies.