S&P trims Pearl Holding III

S&P said it downgraded Pearl Holding III Ltd. to B- from B on what it sees as worsening leverage.

“We downgraded Pearl because we expect the company’s leverage to increase in 2019-2020 on weak industry fundamentals. Suffering from sluggish downstream market demand, the company’s revenue dropped 16% and EBITDA declined 38% year-over-year in the first nine months of the year. Specifically, Pearl’s auto parts segment, which accounts for 44% of its total revenue, saw a 20% sales decline during the period. Given the company’s declining profit, we forecast its adjusted debt-to-EBITDA ratio to weaken to 8x-10x in 2019-2020, from 6.7x in 2018,” said S&P in a press release.

More stringent working capital management could lead better operating cash flows in 2019-2020, S&P said.

The outlook is negative.

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