S&P trims Breakaway Acquisition

S&P said it lowered Breakaway Acquisition LLC’s (Wahoo Fitness) issuer rating to B- from B and senior secured credit facilities to B from B+. The recovery rating remains 2, indicating expectations for substantial (70%-90%; rounded estimate: 70%) recovery in default.

“The downgrade reflects weak operating conditions and our expectation for a material decline in the company's earnings in 2022, which will weaken credit metrics. Wahoo's revenue increased significantly in the first half of fiscal 2021, driven by strong end-user customer demand along with tight supply chain conditions at the end of 2020. Its channel partners thus entered 2021 with substantially lower inventory on hand. However, end-user customer demand fell well below expectations in the second half of 2021, resulting in an over-stocked channel by year-end,” S&P said in a press release.

Additionally, the company faces stiff competition from competitors, such as Garmin and Peloton, S&P said.

The agency also forecasts revenue dropping about 20% and S&P Global Ratings-adjusted EBITDA about 30% in fiscal 2022, resulting in elevated leverage of about 5.5x.

The outlook is negative.

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