Standard & Poor’s lowers PBG’s long-term rating to SD from B+
Standard & Poor’s lowers PBG’s long-term rating to SD from B+
The downgrade of PBG’s rating by Standard & Poor’s (S&P) reflects the standstill agreement concluded in early May between PBG and its financing banks and failure to obtain additional financing by the PBG Group. The rating was removed from CreditWatch which reflected the possibility of its further downgrade.
S&P notes that the agreement with the financing banks is the first step in its planned debt restructuring process. Under the terms of the agreement, the banks will refrain from collecting receivables on maturing short-term bilateral loans until the agreement expiry date, i.e. July 19th 2012. The agreement extended maturities of the loans, but no compensation payments to the bank lenders were made in lieu of this maturity extension.
In the rationale for the update of the rating, S&P notes that PBG has not yet completed the planned new bridge financing of PLN 200m to fund its ongoing operations.
Despite the fact that PBG continues to regularly pay all interest on its debt, the absence of compensation to lenders for extending maturities of the loans and the fact that the standstill agreement was not concluded under normal business circumstances are considered by S&P as a de facto distressed restructuring under S&P’s criteria.
Because not all of the Company's debt is subject to the restructuring (PBG's bonds maturing in September 2012 and 2013 are not affected), S&P assigned PBG a SD (Selective Default) rating.
“When signing an agreement with the Company’s financing banks we were aware that it would affect our credit ratings,” comments Przemysław Szkudlarczyk, Vice-President of the Management Board of PBG.
S&P will reassess PGB's credit profile after the Company emerges from the standstill agreement.