Moody's turns Hasbro outlook to negative

Moody's Investors Service said it changed Hasbro, Inc.'s outlook to negative from stable and affirmed its senior unsecured notes ratings at Baa2.

Hasbro reported negative free cash flow over the past two years given its weak operating performance and an unchanged aggressive shareholder distribution policy with a high dividend payout. “Despite operating weakness, Hasbro maintains its current high annual dividend payout of approximately $390 million, which is credit negative in Moody's view as it detracts from the company's ability to reduce financial leverage. Currently, Moody's-adjusted debt/EBITDA is outsized for the credit rating at 4x as of October 1, 2023,” the agency said in a press release.

Hasbro's plans to use the proceeds from its e-One sale to repay about $400 million of debt during the fourth quarter of 2023 and over the next year its $250 million term loan due December 2024.

“Moody's expects that debt/EBITDA will fall to below 3.5x by the end of 2024 assuming modest growth in operating performance and no change to the company's dividend policy. Moody's estimates that 2024 free cash flows after dividends, and post the e-One divestiture, will be around $100 million to $125 million and excess cash will be used towards debt repayment,” the agency said.

The weaker outlook reflects the risks that operating performance remains feeble over the next 12 to 18 months given the consumer spending environment, Moody’s said.

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