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Moody's downgrades RugsUSA
Moody's Investors Service said it downgraded Runner Buyer, Inc.'s (RugsUSA) ratings, including its corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and the first-lien senior secured revolving credit facility and first-lien senior secured term loan ratings to B3 from B2. The rating outlook is changed to negative from stable.
The downgrade of the CFR to B3 reflects RugsUSA's weaker than expected operating performance and very high leverage with Moody's adjusted debt/EBITDA well over 7x for the LTM period ended June 2022. The company doubled its funded debt in 2021 following LBO the acquisition of RugsUSA by Francisco Partners. At the time, RugsUSA was benefitting from strong demand in the home category.
“In 2022, slowing demand has led to reduced sales and the challenging global supply chain and macroeconomic environment have negatively impacted margins. Higher freight costs contributed to margin declines and shipping delays were further impacted by issues implementing its warehouse management system,” Moody’s said in a press release.
The weaker outlook reflects the erosion in profitability and credit metrics, the agency said.
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