Moody’s changes Varsity Brands view to negative

Moody’s Investors Service said it changed the outlook for Varsity Brands Holding Co., Inc. to negative from stable.

“The outlook change to negative reflects the company’s high financial leverage amid school closures across the U.S. in response to the coronavirus pandemic and the uncertainty around duration of the outbreak and pace of re-openings once pandemic subsides. Almost all states have canceled on-premise school instruction, as well as athletic events, and Moody’s expects that some graduation ceremonies will also be canceled or held online,” said Moody’s in a press release.

“Given anticipated decline in earnings, Moody’s expects financial leverage to increase above 8.0x over the next 6-12 months, and for free cash flow generation to weaken in fiscal 2020,” the agency said.

Moody’s also affirmed Varsity’s ratings, including its corporate family rating at B3, its probability of default rating at B3-PD, and the rating on the senior secured first-lien term loan at B2.

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