S&P lowers Vista Outdoor

S&P said it lowered the corporate credit rating on Vista Outdoor Inc. to BB from BB+.

The agency also said it lowered the rating on the company's $350 million senior unsecured notes due 2023 to BB from BB+.

The 3 recovery rating indicates 50% to 70% expected default recovery.

S&P also said it affirmed the rating on the $640 million term loan A and $400 million revolver due in 2021 at BBB-. The recovery ratings remains at 1, indicating 90% to 100% expected default recovery.

The outlook is stable.

The downgrades reflect an expectation that operating performance will remain weak during the next 12 months as free operating cash flow has declined almost 80% in fiscal 2017, limiting the company's ability to use cash flow to pay down revolving borrowings, resulting in debt leverage of more than 3x for the fiscal year that ended March 31, S&P explained.

The company underperformed its guidance for this period, primarily because of a drop in organic sales in its outdoor products segment, the agency said.

This was largely due to increased promotional activity in a weak retail and wholesale environment that is likely to remain for at least two more fiscal quarters, S&P said.

In addition, the shooting sports segment experienced a greater slowdown that began in the third quarter, the agency said. As a result, the company retains excess ammunition inventory, S&P noted.

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