Rating Cut Raises Fresh Alarm Over Chinese Telecom Firm’s Debt
- Moody’s downgrades Dr. Peng, flags concerns over liquidity
- Ratings firm views repayment extension as distressed exchange
China’s largest private telecommunications services provider is under deeper stress, after a global credit risk assessor cut its rating and labeled a delayed bond repayment by the firm a de facto default.
The latest ratings downgrade and warning about refinancing risk by Moody’s Investors Service deals a fresh blow to Dr. Peng Telecom & Media Group Co. The company has seen its debt load spike and cash flow contract, weakening its ability to cope with a looming bond maturity wall.
A virus-induced dramatic economic slowdown is making life even harder for a firm already threatened by fierce industry rivalry, as well as an uncertain outlook for its efforts to transform itself into a technology company focusing on big data and cloud computing services.
Founded in 1985 as a special steel maker in the western city of Chengdu, the company was among China’s first generation of listed firms with a debut on the Shanghai Stock Exchange in 1994. Mostly via acquisitions, the company transformed itself into a telecom services provider in the early 2000s, with a new look and a new name.
Dr. Peng now boasts a wide array of services ranging from broadband access to big data and cloud computing. Employing 23,000 staffers worldwide, it offers services to over 13 million households in more than 200 cities in both China and North America.
Dr. Peng’s debt-to-asset ratio reached 95% as of the end of March, up from 69% from a year ago. Its net cash flow from operating activities in the first quarter this year shrank 312.3% on year to 278.3 million yuan ($39.3 million).