Moody's downgrades Power Stop

Moody's Investors Service said it downgraded Power Stop, LLC’s ratings, including its corporate family rating to Caa1 from B3, its probability of default rating to Caa1-PD from B3-PD and its senior secured rating to Caa1 from B3.

“The downgrade reflects Moody's view that Power Stop's liquidity will remain weak over the next couple quarters and debt/EBITDA will remain high well into 2023. Power Stop's operating performance has recently been negatively impacted by weakening consumer demand, product and channel mix shifts and its elevated inventory position, which includes high capitalized freight costs from elevated rates over the past 12-18 months. As a result, Power Stop has significantly underperformed Moody's earnings expectations following its early-2022 dividend recapitalization. Moody's expects Power Stop's debt/EBITDA to be around 8x and free cash flow to be negative in 2022,” the agency said in a press release.

That said, Moody’s sees Power Stop’s earnings improving in 2023 as freight costs decline. It estimates the company’s debt/EBITDA will be near 7x by the end of 2023 compared to prior expectations that leverage would reach 5x.

The outlook remains stable.

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