Moody's trims Gibson Brands

Moody's Investors Service said it downgraded Gibson Brands, Inc.'s corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and its senior secured term loan due August 2028 to Caa1 from B2.

The agency said the lower rating reflects the view that Gibson’s financial metrics will continue deteriorating as weakened consumer demand, excess inventory in retail channels and higher interest rates constrain free cash flow and cause higher leverage.

Additionally, Moody’s estimates a weaker fiscal year 2024, ending in March 2024, than it previously forecasted. Financial leverage is projected to climb to 7x debt-to-EBITDA in fiscal 2024 from 5.7x as of the last 12 months ending Sept. 30, 2022 pushed by higher raw material costs, rising wage expenses and elevated freight.

On the positive side, Moody’s said it forecasts about $10 million in positive free cash flow in fiscal year 2024, which it expects to be used to repay the balance on the asset-based lending facility.

The outlook is negative.

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