S&P upgrades Petra Diamonds' credit rating after restructuring

Rating agency Standard & Poor's (S&P) Global has raised its long-term issuer credit rating on Petra Diamonds to 'B-' from 'D' following its restructuring exercise.
Petra's recent debt for equity exchange and restructuring transaction eliminated about $375 million of debt while extending maturities and shrinking the cash interest burden for the next two years.
This includes $30 million in new money, accumulating payment-in-kind interest for the first two years and paying coupons of 9.75% from year three.
"We think the company will need to direct cash flows toward reinvestment in the coming two years to ensure production levels are sustained," said S&P.
It, however, said that Petra will require the substantial capital expenditure in the coming years to sustain current run-rate production levels.
"In our view, Petra's [capital expenditure] will fall below $30 million in FY2021; below the level required to sustain long-term production," it said.
"We think Petra will need to restore capex above $70 million per year from FY2022 to make up for low spending in FY2021 and complete life-of-mine related projects from FY2023."
S&P also projected that the company will generate EBITDA of between $110 million and $140 million from the current financial year through to the 2023 financial year.
Meanwhile, the rating agency said it could lower the rating on Petra if diamond prices unexpectedly fell to the cycle-lows witnessed during 2019 and 2020 or if the South African rand unexpectedly strengthened against the dollar, such that debt to EBITDA increases above five times.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished