DBRS lowers Golfsmith

DBRS said it downgraded the issuer rating of Golf Town Canada Inc. and Golfsmith International Holdings, Inc. to B from B (high), along with the senior secured second-lien notes to CCC (high) from B (low) with recovery rating of RR-6.

The trend also was changed to negative from stable.

The downgrades reflects continued weakness in the group’s sales and earnings, DBRS said, as well as material uncertainty surrounding its future earnings and profitability, which remain well below expectations at the time of their merger in 2012.

The negative trend reflects concerns about the company’s near-term liquidity, as well as its ability to return earnings and credit metrics to levels considered acceptable for the current B issuer rating, DBRS said.

The ratings continue to reflect the discretionary and cyclical nature of the golf retail business, intense competition, sensitivity to weather and risks surrounding longer-term profitability and growth, the agency said.

The ratings are supported by the company’s well-established market position and geographic diversification across North America, DBRS said.

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