(Alliance News) - Moody's Investors Service on Thursday downgraded Petra Diamonds Ltd's corporate family rating to Caa2 from Caa1.
Moody's has also downgraded to Caa3 from Caa1 the rating on the USD650 million guaranteed senior secured second lien notes due in May 2022 issued by Petra Diamonds USD Treasury PLC, a subsidiary of Petra.
The outlook is negative, the ratings agency said.
Moody's explained that the ratings action reflects its view that Petra's credit metrics and liquidity profile will deteriorate over the coming 12-18 months, contrary to the rating agency's previous expectation of a modest and gradual improvement.
"The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets, including the mining sector," Moody's said in its report Thursday.
The negative outlook, meanwhile, reflects the very weak diamond market and pressure on liquidity which has been exacerbated by the temporary suspension of mine operations, Moody's explained.
Looking ahead, the ratings agency said an upgrade would require Petra addressing refinancing risk associated with its May 2022 notes, an overall reduction in gross leverage, and an improvement in its liquidity position.
The ratings could be downgraded if the likelihood of a distressed exchange becomes evident or there is a further deterioration in Petra's liquidity position.
Petra shares closed 8.1% lower in London on Friday at 2.22 pence each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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Petra Diamonds (PDL)