December 23, 2024 09:29 GMT
EM CEEMEA CREDIT: PDLLN: A downgrade is not enough, pressure stays
EM CEEMEA CREDIT
Petra Diamonds (PDLLN; Caa2neg/B-neg/-)
A downgrade is not enough, pressure stays
- PDLLN credit ratings got downgraded by one-notch to B- and outlook negative late Friday by S&P. The agency cites several factors, which we had touched upon in our earlier morning note (PDLLN “Chasing revenues may not suffice, pressure continues”), but the gist of the matter remains short term FCF generation to support debt buybacks and relieve pressure on refinancing needs.
- We skew our view to the downside, as we are not convinced that the base case scenario indicated by the agency will pan out as suggested considering current prospects. We expect pressure on secondary levels to remain elevated.
- PDLLN 9.75 Mar26 quotes on an offer cash price @ 79.00 area indicatively, but we have little visibility of where a firm bid could be. In yield terms, the bonds are somewhere in the 30s area leaving little room for manoeuvre.
- As we previously reported, PDLLN management recently commented on the yield results of its long-awaited participation in Tender 3 (having deferred sales in previous tenders), with USD71mn in revenues for 700,803 carats reflecting persisting weak market conditions (total revenues YTD @ USD146mn, 1,300,964 carats). Net cash generation target for FY25 remains unchanged but cost savings measures will be implemented also affecting workforce.
- Our take from the release was that refinancing remains heavily dependent on the success of such cash generative initiatives as well as more favourable conditions in the diamond market.
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