S&P flips Holley outlook to positive

S&P said it changed its outlook for Holley Inc. to positive from negative and affirmed the B- ratings on the company and its senior secured debt.

Holley's financial performance has gradually improved since the end of 2022. While revenues are still down this year, profitability is up and could enable the company to maintain leverage below 6.5x and boost free operating cash flow to debt above 3%. The improving performance has also widened the covenant cushion, the agency noted.

“The positive outlook reflects our expectation of Holley's improving margins, free cash flow generation, and lower leverage following stronger results the past couple quarters. In the first three quarters of 2023, the company has posted better-than-expected results, with S&P Global Ratings-adjusted EBITDA margins of 19%-20%, up significantly from the second half of 2022,” S&P said in a press release.

S&P noted the brighter outlook indicates the potential for an upgrade if EBITDA margins remain near recent levels, supporting debt to EBITDA below 6.5x and free cash flow to debt greater than 3%.

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