Bitcoin price today: gains to $120k, near record high on U.S. regulatory cheer
Investing.com -- Moody’s Ratings announced on Tuesday that it has downgraded Leslie’s Poolmart, Inc.’s corporate family rating (CFR) to Caa1 from B2. Simultaneously, Leslie’s probability of default rating (PDR) was also downgraded to B3-PD from B2-PD. Leslie’s senior secured term loan rating was lowered to Caa1 from B2 as well. However, the speculative grade liquidity rating (SGL) of Leslie’s remains unchanged at SGL-3, and the outlook has been revised to stable from negative.
The downgrade of Leslie’s ratings is due to Moody’s anticipation that the company’s operating performance will remain below historical averages. This is largely due to the challenging consumer environment faced by the pool industry. Despite Leslie’s showing early signs of stabilization and making efforts to enhance its execution, Moody’s expects the company’s EBIT/Interest to remain around 1.0x. The company’s funded debt/EBITDA is also projected to stay at approximately 7x, considered unsustainable levels, as Leslie’s works towards improving customer service and asset utilization.
The downgrade of Leslie’s PDR to B3-PD is reflective of the company’s longer-dated maturity profile. Leslie’s asset-based revolving credit facility (ABL) is due to expire in April 2029, with a springing maturity of December 2027 if its term loan due March 2028 remains outstanding. Moody’s expects Leslie’s to maintain adequate liquidity and be free cash flow neutral in fiscal 2025, supported by continued improvement in working capital after significant inventory reductions in its September 2024 fiscal year end.
Leslie’s currently has a $250 million ABL and cash, projected to exceed $80 million at the end of September 2025. The company prepaid $25 million in term loan and its ABL usage was $40 million at the end of the fiscal first quarter ended December 2024, compared to $38 million for the same period the previous year.
Leslie’s Caa1 CFR is reflective of its high funded leverage, weak annual pool installations, and weak discretionary spending. The company’s funded debt/EBITDA was 9.2x LTM as of December 31, 2024. Despite a 3% decrease in discretionary spending at Leslie’s in the first fiscal quarter, there was positive growth in its PRO business and chemicals sales. The company reduced its inventory by 25% in fiscal 2024 and continues to maintain a strong position in the pool and spa maintenance product market.
The stable outlook from Moody’s is based on the expectation that Leslie’s revenue and profitability will stabilize and return to growth. This will support a reduction in leverage and improved cash flow generation while maintaining a financial policy focused on debt reduction.
The ratings could be further downgraded if Leslie’s performance does not improve, liquidity weakens, or estimated recoveries decline. Quantitatively, a downgrade could occur if EBIT/interest expense remains below 1.0x. Conversely, the ratings could be upgraded if revenue and earnings consistently improve, liquidity remains good, and financial policies remain conservative. An upgrade could occur if funded debt/EBITDA stays below 6.0x and EBIT/interest expense remains above 1.5x.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.