Moody's downgrades Winebow

Moody's Investors Service said it downgraded the Winebow Group, LLC's corporate family rating and probability of default rating to Caa1 and Caa1-PD from B3 and B3-PD, respectively.

Winebow Holdings, Inc.'s first-lien term loan was simultaneously downgraded to Caa1 (LGD 3) from B2 (LGD 3) and the second-lien term loan to Caa2 (LGD 5) from Caa1 (LGD 5).

The outlook is stable.

The downgrades reflect Winebow's very high financial leverage due to weak operating performance over the past few years and ongoing debt-financed expansion, Moody's said.

As of September 2018, Winebow's debt-to-EBITDA leverage exceeded 11.5x, the agency said.

The ratings reflect the company's high financial leverage, modest scale, niche focus on fine wine imports and distribution and its ongoing acquisition strategy, Moody's said.

Although the company should benefit from relatively low risk inherent in the regulated alcohol distribution business, it has encountered a number of challenges that have hurt results, the agency said.

These include natural disasters, adverse foreign-currency movements and the consolidation of key retail partners, Moody's said.

Winebow also is expected to face increasing refinancing risk over the next few years as credit facilities in its capital structure begin to expire in 2021.

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