Moody’s Ratings confirmed Topgolf Callaway Brands Corp.’s debt ratings and changed its outlook on the company to stable from ratings under review as it expects the deal to sell a majority stake in Topgolf to Leonard Green to reduce debt levels.
The rating actions conclude the downgrade review commenced on August 19, 2024, following Topgolf Callaway’s announcement that it was considering strategic alternatives for the Topgolf International, Inc. entertainment business, including a potential tax-free spinoff of the segment into an independent company.
On November 18, 2025, Topgolf Callaway announced that it entered into a definitive agreement to sell a 60 percent equity stake in its Topgolf entertainment business to Leonard Green for an implied equity value of approximately $1.1 billion. After associated financing transactions, the company expects to receive roughly $770 million in net cash proceeds. The sale is expected to close in the first quarter of 2026, subject to regulatory approvals. Topgolf Callaway will retain a 40 percent minority interest in the Topgolf business and will be restricted from selling its interest for a period of 2 years.
In conjunction with the sale, Topgolf Callaway is requesting lenders’ consent to amend its $1.25 billion term loan B facility to accommodate the separation of Topgolf. The Topgolf subsidiaries will be released from the term loan’s collateral and guarantee package, and Topgolf Callaway will prepay $500 million of the term loan and pay a modest consent fee at closing. Topgolf Callaway will execute the debt paydown at closing alongside the Topgolf equity sale. Topgolf Callaway is also amending its asset-backed lending facility to accommodate the separation but is not changing the size or pricing on the facility currently. Topgolf Callaway Brands Corp. plans to change its name to Callaway Golf Company at the close of the transaction (Callaway).
Moody’s has confirmed the company’s B1 CFR because it expects the standalone Callaway business to have strong financial flexibility, driven by meaningful debt repayments and a sizable cash position. The rating agency anticipates Callaway will operate with considerably lower leverage and generate more consistent free cash flow. Moody’s expects that debt-to-EBITDA will decline to a mid-4x range in 2026 (pro forma for standalone Callaway) from roughly 6.8x as of September 2025 on a combined-entity basis. Cash is expected to increase to about $1.1 billion pro forma for the sales proceeds after factoring in the committed $500 million term loan repayment. Moody’s expects the company to utilize the cash to repay the roughly $258 million of debt outstanding on the 2.75 percent convertible senior notes that mature in May 2026, for reinvestment and share repurchases. The cash position was bolstered by the sale of Jack Wolfskin for $286 million that closed in Q1 2025.
Moody’s said separating Topgolf removes the burden of Topgolf’s heavy capital spending for new venues, which has been a drain on free cash flow. It will also simplify Callaway’s capital structure by eliminating venue financing debt and deemed landlord financing obligations, reducing financial complexity and enhancing transparency. Callaway will retain a 40 percent ownership interest in Topgolf and could elect to provide capital to support the investment, though there are no specific funding obligations. The majority of Topgolf Callaway’s leases are expected to remain with the Topgolf business, and the reduction in interest expense, including a portion from leases, to roughly $65 million from well above $200 million, will support strong free cash flow generation at Callaway.
Moody’s added that these positive factors offset the reduction in business diversity. Callaway retains a leading market position in the competitive and discretionary golf equipment, balls, and apparel businesses. However, Moody’s said operating earnings in these core segments are volatile and dependent on the timing of new product releases. Moody’s said it nevertheless believes continued healthy golf participation and Callaway’s good investment flexibility will support solid earnings and comfortably positive free cash flow.
Ratings confirmed include Topgolf Callaway’s B1 Corporate Family Rating (CFR), B1-PD Probability of Default Rating, and the B1 rating on the senior secured term loan B. Topgolf Callaway’s SGL-1 speculative grade liquidity rating is unchanged.
Moody’s said in its analysis, “Topgolf Callaway’s B1 CFR reflects its moderate financial leverage pro forma for the debt repayment expected following the November 2025 announced transaction to sell a 60 percent interest in the Topgolf entertainment business. We expect debt-to-EBITDA leverage to decline to mid-4.0x levels in 2026 from 6.8x for the last 12 months ending September 2025, driven by meaningful debt repayment from the proceeds of the Topgolf and Jack Wolfskin asset sales. High leverage nevertheless remains a credit risk considering the discretionary nature of the golf equipment, accessories and apparel categories.
“The company is vulnerable to shifts in discretionary consumer spending and consistent investment in new product development and marketing is necessary to maintain competitive equipment offerings. Equipment is largely manufactured outside of the US, creating vulnerability to supply chain disruptions and tariffs. However, roughly half of the golf ball revenue is manufactured in the U.S., helping partially mitigate this risk. Topgolf Callaway’s credit profile is supported by its strong market position and good geographic and segment diversification within golf equipment and apparel. The credit profile also reflects Topgolf Callaway’s very good liquidity, large scale, and good product performance from the golf equipment business. The company is targeting to operate the core golf and apparel business after the Topgolf disposition at 3.0x or below net debt-to-EBITDA leverage (based on the company’s calculation).”
Image courtesy Topgolf
