Brunswick downgraded to Baa3 by Moody’s as boat demand slumps

Investing.com -- Moody’s Ratings has downgraded Brunswick (NYSE:BC) Corporation’s senior unsecured notes to Baa3 from Baa2 and commercial paper rating to Prime-3 from Prime-2, while maintaining a negative outlook.

The downgrade reflects ongoing challenges that are expected to prevent improvement in Brunswick’s credit metrics over the next year. The company’s operating earnings continue to suffer from lower boat demand as consumers remain hesitant to make large discretionary purchases amid uncertainty from tariffs and higher interest rates that directly impact boat financing costs.

Despite plans to reduce debt, Brunswick’s debt to EBITDA remains elevated at approximately 3.75x as of June 2025 and is unlikely to decrease significantly over the next 12-18 months. The company has repaid $235 million of debt since early 2023 and plans to reduce an additional $105 million by the end of 2025.

Moody’s cited Brunswick’s decision to continue share repurchases during a period of earnings weakness as "aggressive," noting it shows a concerning prioritization of shareholder distributions while leverage remains high. The company is targeting approximately $80 million in share repurchases in 2025, though it also plans to repay a total of $175 million in debt this year, with about $70 million already repaid in the first half.

The rating agency expects Brunswick’s sales to remain flat at around $5.2 billion through 2026, with margins struggling to improve to historic levels due to tariff headwinds. The aftermarket parts and accessory segment is expected to remain resilient given the steady population of boats and tendency toward repair instead of replacement during downturns.

Brunswick maintains very good liquidity with full availability on its $1 billion revolver expiring in October 2029, cash balances of $316 million as of June 28, 2025, and no debt maturities until 2029.

The negative outlook reflects Moody’s expectation that Brunswick’s earnings will remain under pressure due to weak demand for boats and marine products, with financial leverage remaining elevated above 3.0x. Ratings could be downgraded if boat demand continues to weaken, operating performance doesn’t improve, or if debt-to-EBITDA leverage is sustained over 3.0x.

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