The risk rating agency Standard & Poor’s (S&P) reduced the rating of Grupo Bandeirantes de Comunicação, according to a statement published on Wednesday (24). The conglomerate, which includes companies such as TV Band, BandNews, BandSports, had its credit rating downgraded to ‘brCCC-’.
According to the agency, the reason for the alert is due to “future impacts of COVID-19 (coronavirus) on its operations and liquidity; negative perspective ”.
Before the note 'brCCC-', whose speculative degree is considered of substantial risk, the group remained in a situation of 'highly speculative' (brB +) at the agency.
Its issuance rating also declined; from ‘brBB-’ to ‘brCCC’. This is true even with a recent increase in audience, as described in the report. The scale of S&P ranges from AAA (good payer) to D (default risk).
According to the document, Band's sports area was one of the company's most affected due to the suspension of sporting events. Another point cited is the drop in the number of advertisers.
As detailed, a drop in revenue is likely given the potential renegotiation of contracts and cancellations of sporting events.
For the agency, this should affect revenues in the coming months without the company being able to cut costs, investments and renegotiate with suppliers at the same pace.
“We believe that the cash generation of Grupo Bandeirantes de Comunicação (Band) will be negatively impacted by the effects of the rapid spread of the new coronavirus (COVID-19). In this way, we understand that your current capital structure will be pressured by the weak liquidity presented ”.
Band in the next 12 months
For the next 12 months, says the agency, the capital structure of the Bandeirantes Group will continue to be pressured by the weak cash generation expected in 2020.
According to experts, the condition of the capital will not be sufficient to cover all needs during this period.
“In addition, we changed the outlook on the issuer rating from positive to negative. The negative outlook reflects our expectation of a greater likelihood of a debt renegotiation in the next six months that we would consider distressed, ”says the statement.
In other words, the agency foresees difficulties in the Bandeirantes Group's capacity to settle debts, since the cash must be insufficient to cover its needs.
According to S&P, the group has R $ 270 million in loans and financing that has been paid since September last year.
At that time, there was around R $ 73 million in cash, according to the agency; the forecast for working capital was R $ 60 million for the next 12 months.
The same was forecast for internal cash generation – at the time, for a negative R $ 80 million.
Also according to the document, the group has investments (capex) in maintenance of R $ 10 million and payment of dividends of R $ 2 million for the same period.
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