Moody’s upgraded the debt ratings of Vista Outdoor Inc. because Vista repaid a significant amount of debt over the last two years. The rating agency also expects the company’s operating performance to remain strong over the next 12 to 18 months as ammunition demand remains robust and as the company continues to work through its material backlog.

Moody’s upgraded Vista’s Corporate Family Rating to B1 from B2. Concurrently, Moody’s upgraded Vista’s Probability of Default Rating to B1-PD from B2-PD and upgraded its senior unsecured notes rating to B3 from Caa1. The Speculative Grade Liquidity Rating was upgraded to SGL-1 from SGL-2. The outlook remains positive.

Moody’s wrote in a press release, “The anxiety caused by the pandemic and high political discord in the US will continue to sustain demand for ammunition at higher levels as new gun owners enter the market and existing owners stockpile ammunition. Additionally, the company’s outdoor segment will remain strong as consumers continue to seek outdoor activities due to the coronavirus. Over the next 12-18 months, Moody’s expects Vista’s FY 2022 annual sales to reach $2.2 billion and EBITDA to improve to approximately $290 to $300 million with Debt to EBITDA maintained at 1.7x.

“The positive outlook reflects Moody’s expectation that demand for Vista’s products will remain strong as ammunition sales continue to surge to support the large backlog of orders. The outlook also reflects Moody’s expectation of a high likelihood that financial leverage will be maintained at lower levels as EBITDA remains robust for the next year and debt continues at the existing level.

“The upgrade of the speculative grade liquidity level to SGL-1 from SGL-2 reflects the company’s improved liquidity over the next 12 months as cash balances will increase from the strong free cash flow of approximately $130 million, and the lack of debt maturities until the notes mature in 2023. Additionally Moody’s expects that the company will maintain the availability of $400 million under its undrawn ABL revolver facility that expires in 2023 and good covenant cushion.”

Photo courtesy Vista Outdoors