Moody’s Investors Service upgraded ratings of CWGS Enterprises, LLC, doing business as Camping World, as RV demand has taken off during the coronavirus pandemic.

The upgrades include the Corporate Family rating, which was upgraded to B2 from B3 and the speculative grade liquidity rating was upgraded to SGL-2 from SGL-3. The outlook was changed to stable from negative.

“Today’s rating action reflects the rebound in Camping World’s operating performance as RV demand recovered dramatically from the late-March, early-April softness, with the result, the company posted operating income growth of over 100 percent, which in turn reduced leverage below five times and improved interest coverage to around 2 times,” stated Moody’s Vice President Charlie O’Shea. “Liquidity is good, with cash of $228 million and floorplan offset availability of $217 million at the end of Q2, and Moody’s expects these favorable trends in operating performance to continue in the remainder of 2020,” continued O’Shea. “That said, Moody’s believes more normalized consumer spending patterns will return in 2021 which may result in lower demand trends for RVs. However, there is a cushion at the current quantitative profile to withstand a reasonable level of stress.”

Upgrades

  • Probability of Default Rating, Upgraded to B2-PD from B3-PD
  • Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
  • Corporate Family Rating, Upgraded to B2 from B3
  • Senior Secured Bank Credit Facility, Upgraded to B2 (LGD4) from B3 (LGD4)

Outlook Actions

  • Outlook, Changed To Stable From Negative

Moody’s wrote in a statement, “Camping World’s B2 rating considers its improved quantitative credit profile, industry fundamentals that rebounded quickly from pandemic-related softness, its leading market position within the recreational vehicle segment, its flexible business model that provides multiple sources of revenue, with retail sales, membership sales, and parts and accessories through its dealership and retail networks, as well as the risks inherent with its acquisition-based growth strategy. The rating is also supported by Camping World’s good liquidity supported by its $228 million cash balance and floorplan availability of $217 million, with meaningful maturities long-dated.

“The stable outlook reflects Moody’s view that the recent improvement is largely sustainable and that Camping World will be able to maintain credit metrics in line with its ratings when more normalized consumer demand returns. The stable outlook also reflects that the company has flexibility surrounding its mix between new and used vehicles, as well as the fairly predictable profit streams from Good Sam such that it can limit the potential downsides that could result from a potentially lingering demand ‘shock.'”

Logo courtesy Camping World