Standard & Poor’s and Moody’s lower PBG's ratings to “D”
Standard & Poor’s and Moody’s lower PBG's ratings to “D”
Standard & Poor’s Ratings Services (S&P) and Moody’s updated their ratings on PBG. Both agencies downgraded the ratings to D (default), indicating that it reflected filing of the insolvency petitions by PBG S.A. and two of its subsidiaries, Hydrobudowa Polska and APRIVIA. The filing resulted from PBG’s failure to obtain additional funding to secure financing for its ongoing operations, including payments to subcontractors.
S&P lowered its long-term corporate credit rating from SD (selective default) do D (default). Moody’s also decided to downgrade PBG’s PDR (probability of default rating) from Caa1 to D, and the CFR (corporate family rating) from Caa3 to Ca.
The agencies stated that their decisions to downgrade the ratings followed from the fact that PBG and two of its subsidiaries filed petitions for insolvency. The analysts emphasised that, according to a statement by PBG, the bankruptcy filing was a result of the difficult liquidity situation following prolonged discussions with the lenders, the heavy capital requirements of low-margin road contracts, and only partial settlement of the contract for the construction of the National Stadium in Warsaw. The difficult liquidity position of the Group is also attributable to the withdrawal of one of the financing banks from its commitment to finance the acquisition of RAFAKO, and the need to finance the transaction using the Group’s own funds and drawing on available credit lines.
Moody’s supported its decision to lower the ratings with the fact that the standstillagreement, through which various banks agreed temporarily to extend loan maturities, was terminated.
Further, the agency downgraded the PDR based on the estimate that overall recovery levels are likely to be lower than 65%. Moody’s believes that there is a considerable execution risk related to obtaining agreement from the Company’s creditors to the restructuring proposal and PBG may be obliged to file a petition for final liquidation. Recovery levels are likely to be depressed in a final liquidation, particularly for receivables which represent its largest class of assets.