Moody's slices West Marine

Moody's Investors Service said it downgraded Rising Tide Holdings, Inc.'s (West Marine Inc.) ratings including its corporate family rating to Caa2 from B3, its probability of default rating to Caa2-PD from B3-PD, its senior secured first-lien term loan to Caa3 from B2 and its senior secured second-lien term loan to Ca from Caa2.

The agency revised the outlook to negative from stable.

“The downgrade and negative outlook reflect West Marine's material underperformance relative to Moody's previous expectations due to supply chain challenges, increased costs, inflationary pressures, high fuel prices and late start to the season driven by weaker weather which impacted boating and demand for the company's products.

West Marine's Q2 and Q3 peak seasonal quarters of 2022 were down significantly to the prior year with Moody's adjusted EBITDA declining more than 40%. The decline in EBITDA combined with the increase in debt to fund the 2021 LBO has resulted in West Marine having very high leverage,” Moody’s said in a press release.

The company’s Moody's adjusted debt/EBITDA nears 18x, and the West Marine’s had free cash flow deficits of more than $50 million over the LTM period ended Oct. 1.

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