Moody's trims Wolverine

Moody's Investors Service said it downgraded Wolverine World Wide, Inc.'s ratings including the corporate family rating to Ba3 from Ba2, probability of default rating to Ba3-PD from Ba2-PD and senior unsecured notes rating to B1 from Ba3. The SGL-2 speculative grade liquidity rating remains unchanged.

“The downgrades reflect the company's updated Q4 2022 guidance, which was lower than previously projected by Moody's, as well as Moody's expectation that leverage will remain high over the next 12-18 months. As a result of the updated guidance, Moody's now projects adjusted debt/EBITDA increasing to 6.1x in Q4 2022 from 5.9x as of Q3 2022 (including standard adjustments for the accounts receivable securitization program).

“However, Moody's expects this spike in leverage to be temporary and that leverage is likely to decline in 2023 to the high-4x range, driven by revolver paydown with free cash flow and potential proceeds from the planned sales of the Keds and Wolverine Leather businesses. In addition, earnings are likely to recover in the second half of 2023, reflecting lower freight costs, reduced clearance activity and cost reduction. However, free cash flow excluding working capital will remain modest because of increased interest expense and ongoing costs for environmental remediation and litigation,” the agency said in a press release.

The outlook remains negative.

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