Moody's cuts Athletico, rates loan Caa1

Moody's Investors Service said it downgraded Athletico Holdings, LLC's ratings, including the corporate family rating to Caa1 from B3, the probability of default rating to Caa1-PD from B3-PD and the senior secured first-lien facilities ratings at the subsidiary level, to Caa1 from B3. The agency also assigned a Caa1 rating to the planned $75 million incremental term loan. The outlook was changed to stable from negative.

“The ratings downgrade follows the company's announced incremental term loan issuance structured as a PIK toggle. Proceeds will be partly used to pay down the existing revolver balance and to add cash on the balance sheet. While the term loan issuance eases near-term liquidity constraints by increasing revolver availability, Moody's expects a slower pace of deleveraging and longer timeline to reach breakeven free cash flows than previously anticipated,” the agency said in a press release.

Moody's said it estimates Athletico’s debt/EBITDA for FY 2022 at about 10x and expects it to remain elevated at above 8.5x over the next 12-18 months. “Additionally, Moody's expects pressure on cashflows will persist with negative free cash flow in 2023.”

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