Moody’s cuts Athletico

Moody's Investors Service said it downgraded Athletico Holdings, LLC's ratings, including the corporate family rating to Caa2 from Caa1, the probability of default rating to Caa2-PD from Caa1-PD and ratings on the backed senior secured first-lien credit facilities at the subsidiary level, Athletico Management, LLC, to Caa2 from Caa1.

“The ratings downgrade reflects slower-than-expected improvement in operating results over the last year and Moody's expectation that pressure on cash flows will persist. Moody's expects continued negative free cash flow in 2024 which Moody's expects to be funded with additional revolver draw,” the agency said in a press release.

Additionally, Moody’s said it expects Athletico may need to tap the capital markets to bolster its liquidity. As the company continues borrowing on its revolver, there is also an elevated risk of a covenant breach. Athletico has a maximum net leverage covenant with a net leverage of about 7.7x under the credit agreement definition at Sept. 30, compared to the max net leverage of 8.25x.

The outlook remains stable.

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