The share prices of both Speedcast International Ltd (ASX: SDA) and CYBG Plc (ASX: CYB) fell today, here’s why.
Speedcast International Share Price Falls 3%
The Speedcast share price dropped 3% after its credit rating was lowered by two of the large credit rating agencies.
S&P Global has lowered its issuer credit rating to B from B+ and placed its rating on CreditWatch negative.
Moody’s has also lowered its issuer credit rating to B2 from B1 and retained its negative rating outlook.
The downgrades were due to the release of its recent report with poor cashflow, which Speedcast described as non-structural and mostly due to adverse short term working capital movements.
Cashflow is expected to improve with lower capital expenditure, a pause in dividends and cost savings.
Speedcast said it does have a ratings covenant in its debt facilities and the only financial covenant in place requires its net debt to pro forma EBITDA (click here to learn what EBITDA means) ratio to be less than 4.5x, it was 3.6x at 30 June 2019.
CYBG Share Price Drops 20%
The CYBG share price declined so heavily because the bank announced that there are £300 million to £450 million more PPI costs.
The bank saw 340,000 information requests over five weeks. During August the company experienced eight months’ worth of requests in one month. There were around 120,000 requests in just the final three days of the August deadline.
Based on these complaints, the company estimated the cost based on historical uphold rates, average redress and cost-to-do assumptions. A 5% complaint conversion rate would mean £300 million of more PPI costs and a 12% conversion rate would mean £450 million of PPI costs.
The final outcome could be below or above the estimated range, but the company doesn’t expect to be able to give a more accurate reading until the release of its full year result on 28 November 2019.
I think both of these negative pieces of news is why I’d prefer to own very reliable businesses in my portfolio like the ones revealed for free in the report below.
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