Moody’s downgrades RugsUSA

Moody’s Ratings said it lowered RugsUSA's (Runner Buyer, Inc.) ratings including its corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD and the senior secured first-lien revolving credit facility and senior secured first-lien term loan ratings to Caa1 from B3. The outlook is changed to stable from negative.

“The downgrade reflects RugsUSA's continued financial performance challenges and weak credit metrics with our expectation of debt/EBITDA to be about 7.8x and EBITA/interest to be about 1x for year-end 2023. In 2023, demand continued to soften considerably and revenue trends have shown sustained weakness leading to EBITDA erosion. EBITDA levels remain depressed notwithstanding the benefits from lower freight costs and the positive impact of the mostly equity-financed Annie Selke transaction in 2023,” Moody’s said in a press release.

The agency said it sees RugsUSA’s performance stabilizing this year but that leverage remain elevated at above 7.5x.

However, the improved outlook reflects an expectation that revenue declines will stabilize with flat sales in 2024 and modest EBITDA expansion.

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