Peace Mark (304) in deep trouble?
Peace Mark made an annoucement last night on the latest development in the company. In a short sentence, the company is in deep shit. Banks are asking for repayment of their outstanding loans, and their original white knight, CVC, has pulled out from the deal.
When a company is facing financial problem, whether a company can revive is at the mercy of the banks. Liquidity of the company is just like oxygen for human beings, and banks are the one deciding whether a company in the intensive care unit should keep its oxygen mask or not. But, with banks that are conservative by nature, how many ailing companies can really survive?
If Peace Mark were able to get its new syndicated loan, the company’s cash flow will probably be alright and the company should be able to survive this crisis. Their operation is generating cash and their net gearing is decreasing, albeit slowly. Too bad the company has been too optimistic in getting funding from banks. When a company is good, banks will line up to the company to give out loans; when it encounters some slight problem, banks will pull out as soon as possible to minimize their potential losses.
