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Moody’s downgraded Sritex to Ca from B3 with a negative outlook. Sritex is planning on restructuring its bank debt, which once completed, would be considered by Moody’s as a distressed exchange and thereby a default under the agency’s definition. Loss of bank funding is expected to significantly disrupt operations and would add to liquidity issues. Moody’s expects the recovery value for Sritex’s bondholders to be low in a default scenario. The negative outlook comes on the back of further uncertainty on the recovery rate for its total $375mn in bonds in the event of default. “Today’s rating action reflects the significant uncertainties over the sustainability of Sritex’s current capital structure and the risk that Sritex’s highly challenged liquidity situation could result in a near term acceleration of payments relating to the company’s obligations,” said Stephanie Cheong, a Moody’s lead analyst for Sritex. Sritex has seen downgrades by Moody’s and Fitch in the last one month and its dollar bonds have plummeted. It recently hired Helios Capital for restructuring.

Sritex’s 7.25% 2025s and 6.875% 2024s are trading at distressed levels of 30, falling over 10% since Fitch’s downgrade last week.

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