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Home arrow Latest News arrow Short-Term Debt Dependence, Pan Brothers (PBRX) Rating Cut To B1


				
			
			
Short-Term Debt Dependence, Pan Brothers (PBRX) Rating Cut To B1 PDF Print E-mail
Written by Maizer   
Tuesday, 05 May 2020

The risk of debt repayment due by PT Pan Brothers Tbk (PBRX) increases. This made the rating agency Moody's Investors Service downgrade the company from B2 to B1.

 

At the same time Moody's also cut its debt rating issued by the textile manufacturing company to B1 from previously B2. The unsecured debt maturity rating of 2022 is issued by PBRX's subsidiary, PB International BV. While the outlook for Pan Brothers and debt securities remained negative.

 

"The downgrade reflects the high risk of refinancing related to Pan Brothers revolving credit facility worth US $ 138.5 million due in February 2021," explained Stephanie Cheong, Moody's Analyst in a release. Moody's rate, Pan Brothers liquidity is increasingly narrowing.

 

"We hope that Pan Brothers will have a little effort to support liquidity to withstand any setbacks in income or stretch of working capital against widening debt. This condition presents a significant challenge for companies with B2 and below ratings," Cheong explained.

 

As of September 30, 2019, Pan Brothers had a cash balance of US $ 64 million and US $ 36.5 million available cash. While the revolving credit facility that can be withdrawn is worth US $ 138.5 million. Moody's believes that most of the credit will be withdrawn by the end of March 2020.

 

The Pan Brothers business is seasonal and requires a lot of capital which is at its peak in the first half of this year. This will have a negative impact because the cash supply from operations and the increased dependence on revolving credit facilities will mature in less than one year.

 

While new working capital can be obtained in the second half of this year. Delays in customer orders or receivables can worsen Pan Brothers' condition. At present the condition is getting worse because of the corona virus outbreak which provides a gap in working capital and cash flow.

 

In turn it is likely to sue Pan Brothers to fully withdraw the revolving credit facility and eat cash funds under the pillow. This will increase liquidity pressure.

 

The spread of the corona virus outbreak worsens the global economy. Plus, falling oil prices and asset prices created severe and widespread credit shocks in many sectors, regions and markets. The combined credit effect of this unprecedented development. Pan Brothers is exposed to the retail industry which is significantly affected by surprises because it is very sensitive to demand and sentiment.

 

 

 
		
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