Moody's downgrades Corsair Gaming

Moody's Investors Service said it downgraded Corsair Gaming, Inc.'s corporate family rating to B2 from B1, probability of default rating to B2-PD from B1-PD and senior secured first-lien revolving credit facility and term loan ratings to B2 from B1. Moody's also lowered the company's speculative grade liquidity rating to SGL-3 from SGL-2.

“The rating downgrades are driven by the company's high financial leverage and weaker cash flow generation than expected. Softening consumer demand, excess inventory in retail channels and inflationary pressures are constraining Corsair's profitability. The company's cash generation is weakening because of lower-than-expected EBITDA and lower volumes through the first nine months of 2022.

EBITDA margin deterioration, expected to be in the low single digit by the end of 2022, is attributed to higher promotional activities, higher logistics expenses carried over from the prior year, and not yet absorbed, and restructuring actions the company implemented to align with the much lower revenue expectations for 2022,” Moody’s said in a press release.

The agency said it estimates Corsair’s leverage will fall to slightly under 5x over the next 12 months compared to about 7x as of Sept. 30.

The outlook is negative.

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