Moody’s Investors Service Pure Fishing’s corporate family rating (CFR) to Caa1 from Caa2, its Probability of Default Rating (PDR) to Caa1-PD from Caa2-PD, and the company’s senior secured first lien term loan rating to Caa1 from Caa2. The outlook remains stable.
Moody’s said the ratings upgrade reflects Pure Fishing’s strong third-quarter performance which resulted in better operating performance year-to-date and versus Moody’s previous expectations, leading to meaningful improvement in financial leverage and free cash flow generation. The company’s debt/EBITDA leverage declined to about 7.8x for the last twelve months (LTM) period ending September 30, 2020, down from 9.3x at fiscal year-end 2019. Pure Fishing’s lower debt/EBITDA financial leverage provides cushion within its Caa1 rating to absorb potential future variation around operating results, particularly following a very strong fiscal 2020. In addition, elevated unemployment and a tenuous economic recovery are likely to continue to lead to volatility in discretionary consumer spending.
Moody’s wrote in its report, “Pure Fishing’s Caa1 CFR reflects its relatively moderate scale with revenues of $545 million and its high financial leverage with debt/EBITDA at 7.8x for the LTM period ending September 30, 2020. The company’s products are concentrated within the mature and discretionary fishing product category, and a prolonged period of high unemployment or weak economic conditions will negatively impact the company’s operating results. Pure Fishing has customer concentration with its top customer accounting for around 20% of sales. Governance factors include the company’s aggressive financial policies under private equity ownership, including elevated financial leverage.
“The rating also reflects Pure Fishing’s strong market presence in the fishing products industry, and its portfolio of long-standing well recognized brands among fishing enthusiasts. The company has good geographic diversification and benefits from its product diversification within fishing gear. Consumer demand for the company’s products has been very strong year-to-date as consumers are spending more on outdoor activities such as fishing, due to social distancing measures because of the coronavirus pandemic. Moody’s expects fishing products utilization to remain elevated into the first half of 2021, which will somewhat help offset revenue and earnings headwinds from tough comps in fiscal 2021 versus the elevated demand experienced this year. As a result, Moody’s expects debt/EBITDA will remain high around current levels and for free cash flows to moderate in the $15 million range pressured by normalization of working capital. Pure Fishing’s adequate liquidity reflects its relatively healthy cash balance of $74.2 million and $74 million available on its $125 million revolver, which provides financial flexibility to fund operating seasonality and anticipated working capital investments over the coming quarters needed to improve service levels.”
Headquartered in Columbia, SC, Pure Fishing primarily designs, manufactures and sells fishing equipment including rods, reels, lures, artificial bait, and related fishing tackle worldwide. Since December 2018 the company is owned by private equity sponsor Sycamore Partners. Revenue is around $545 million for the LTM period ending September 30, 2020.
Photo courtesy Pure Fishing
