Moody's slashes Mad Engine

Moody's Investors Service said it downgraded Mad Engine Global, LLC's ratings including its corporate family rating to Caa2 from B3 and its senior secured first-lien term loan to Caa2 from B3. The outlook was changed to negative from stable.

“The downgrade reflects the company's severely weakened credit metrics due to a customer demand pull-back, the delayed realization of acquisition synergies, elevated labor and freight costs, a heavily promotional environment in 4Q'22 and higher interest rates. As a result, Moody's adjusted debt/EBITDA is unsustainably high at 17.8x times and EBITA/Interest is 0.2x as of the year ended Dec.31, 2022,” the agency said in a press release.

However, Moody’s added, “Mad Engine anticipates a rebound in 2023 as the company run-rates the integration of the Fortune and Fifth Sun acquisitions and the transition and consolidation of production and warehousing infrastructure in Mexico and California.”

“The negative outlook reflects the significant risks of the rebound given the uncertain macroeconomic and retail environment. It also reflects that Mad Engine would still have weak credit metrics pro forma for the expected rebound in performance in 2H'23,” Moody’s said.

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