NEW YORK – Moody’s Investors Service has revised Brunswick Corp.’s rating outlook to stable from negative due to its expectation that its credit risk profile will not deteriorate further and may in fact improve over the near to mid-term, the company reported in a statement yesterday.
At the same time, it upgraded the speculative grade liquidity rating to SGL 1 and affirmed all other ratings including the B2 CFR and PDR, Ba3 secured notes and Caa1 unsecured notes.
“We believe Brunswick’s strong liquidity profile, improved cost structure, enhanced health of its dealership network and increased wholesale shipments should enable it to maintain its current credit profile, even if retail demand in 2010 declines more than the 10 percent the company is currently planning for and despite the burgeoning sovereign debt crisis,” said Kevin Cassidy, senior credit officer at Moody’s Investors Service. “If retail demand were to approximate the company’s planning assumption rather than the 20-percent decline experienced in the first quarter and worldwide financial markets stabilize, Brunswick’s credit profile could improve in the near term.”
The stable outlook reflects Moody’s expectation that retail demand in 2010 will not materially decline beyond its current pace in the near to mid-term despite its expectation of modest discretionary consumer spending and that revenue and operating income will steadily improve, the company stated. The corresponding enhancement in credit metrics is also incorporated in the stable outlook as is Moody’s assumption that Brunswick will make additional cost cutting moves if necessary. The stability of Brunswick’s senior executives is also assumed, the company said.
“The upgrade in the speculative grade liquidity rating to SGL 1 from SGL 2 indicates that we believe Brunswick will maintain its strong liquidity profile for at least the next twelve months,” Moody’s stated. “Brunswick’s liquidity is supported by cash balances of around $550 million, Moody’s expectation of positive free cash flow in 2010 even if retail demand falls around 20 percent, access to over $125 million in credit facilities combined between the $400 million ABL and $100 million Mercury ABL and no near term debt maturities.”
Moody’s also said that it expects Brunswick’s operating results to meaningfully improve in the near to mid-term as Brunswick continues to increase its production to meet the reduced demand levels.