Moody's downgrades PlayPower

Moody's Investors Service said it downgraded PlayPower, Inc.'s ratings including its corporate family rating to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD, and the rating on the company's first-lien credit facility to Caa1 from B3. The first-lien credit facility consists of a $45 million first-lien revolver due 2024 and a $400 million original principal amount first-lien term loan due 2026. The outlook remains negative.

“The ratings downgrades and negative outlook reflects PlayPower's weakened liquidity and meaningfully lower profitability. Persistent operational disruptions at its manufacturing facilities continue to pressure profitability and the ongoing negative free cash flows will continue to deteriorate PlayPower's liquidity. The company has limited effective availability on its $45 million revolver due to the revolver's springing net leverage covenant if utilization exceeds 35% of the commitment amount. The company is not in compliance with the covenant if it were to be tested,” the agency said in a press release.

However, demand for PlayPower’s company’s remains healthy, but a fire at one plant and other issues have limited its ability to fill orders and shave its historically high order backlog, Moody’s said.

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