Moody’s sees 1-800 Contacts positively

Moody’s Investors Service said it changed its outlook for 1-800 Contacts Inc. (CNT Holdings I Corp.) to positive from stable and affirmed its ratings, including the B2 ratings on 1-800 Contacts' backed senior secured first-lien bank credit facilities inclusive of the company's proposed $350 million backed senior secured first-lien term loan add-on and Caa2 rating on its second-lien term loan.

“The outlook change to positive reflects Moody's expectation that 1-800 Contacts' will exhibit continued financial performance strength over the next 12-18 months which will more than offset the modest weakening in credit metrics following the debt-financed dividend to shareholders. Pro forma for the transaction, Moody's estimates 1-800 Contacts debt/EBITDA will be 6.4x at year-end 2023. Based upon Moody's forecasts for EBITDA growth, debt/EBITDA will reduce to approximately 5.6x and EBITA/interest will approach 1.75x by year-end 2024

“The positive outlook also reflects 1-800 Contacts' very good liquidity including sizable positive free cash flow. Moody's expects approximately $110 million of free cash flow (outside of the $200 million dividend) and full availability on the proposed $135 million revolving credit facility,” the agency said in a statement.

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