Fitch cuts Global Cloud Xchange, notes

Fitch Ratings said it downgraded Global Cloud Xchange Ltd.’s long-term foreign- and local-currency issuer default ratings to B- from B+.

The outlook is negative.

The agency also downgraded the rating on GCX Ltd.’s $350 million 7% senior secured notes due 2019 to B+/RR2 from BB+/RR1. GCX Ltd. is a wholly owned subsidiary of Global Cloud Xchange. The notes are secured by the assets and equity interests of Global Cloud Xchange and its key subsidiaries and are guaranteed by Global Cloud Xchange and its key operating subsidiaries, which generate most of group's revenue and EBITDA.

Fitch said the downgrades reflect its expectations that Global Cloud Xchange’s liquidity could weaken significantly in the financial year ending March 2018 (FY18).

The company’s cash balance could deplete to below $40 million in fiscal year 2018 (fiscal 2017: $62 million) due to lower indefeasible right of usage (IRU) sales, weakness at its managed service segment and working capital outflows. The agency forecasts FFO-adjusted net leverage to deteriorate to over 5 times in fiscal 2018 (fiscal 2017: 4.2 times).

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