PETRA Diamonds is to begin discussions with financiers on refinancing a $273m bond that matures in March next year amid scepticism that the company will survive the event.
The ratings agency S&P last week downgraded the company’s credit to CCC on the increased likelihood of default, and maintained a negative outlook.
Shares in the company fell 10% today shortly after the company posted its third quarter results. Petra is now trading at a fresh all-time low and is valued at only £34m on the London Stock Exchange.
While its remaining two assets – the Cullinan and Finsch mines in South Africa – had a solid three months operationally, with a quarter to go, full year guidance has been maintained at 2.4 to 2.7 million carats.
However, the company is still burning cash.
Petra drew on a further $33m as consolidated net debt increased to $258m as of end-March, which the company put down to working capital requirements.
The truth is that the company is desperately in need of improved diamond prices, which have continued to trough this year amid economic uncertainty generated by US President Donald Trump’s on-off tariff regime.
Petra said in April that it had postponed the sale of about 200,000 carats of diamonds from the Cullinan mine near Pretoria because of the “considerable diamond market uncertainty caused by the US tariffs announcement”.
“S&P believes the company faces mounting liquidity challenges amid uncertainty regarding the recovery of the rough diamond market and approaching debt maturities in 2026, with increased likelihood of default – including distressed exchange or debt restructuring – over the next 12 months, if Petra is unable to refinance its debt maturities on time,” said analysts at Berenberg Bank in a note last week.
Commenting on the third quarter results – in which revenue fell to $42m from $106m in the comparative quarter last year (buoyed by sales from a deferred tender) – interim joint CEOs Vivek Gadodia and Juan Kemp, said Petra had experienced “a very difficult diamond market”.
They added: “We believe the steps we have taken over the past 12 months position Petra well for a successful refinancing. We will now look to commence engagements with our lenders on the refinancing of our debt maturing in early 2026.”
