Moody’s lowers RE/MAX

Moody's Investors Service said it downgraded RE/MAX, LLC’s corporate family rating to B1 from Ba3, the probability of default rating to B1-PD from Ba3-PD, and the senior secured first-lien credit facilities ratings to B1 from Ba3. The Speculative Grade Liquidity rating remains at SGL-1. The outlook was changed to negative from stable.

“The downgrades and outlook change to negative reflects Moody's expectations that softening conditions in the U.S. housing market will result in further declining home sale transaction volume and a continued decline in RE/MAX's U.S. agent count.

“Moody's expects that lower revenue and financial returns will contribute to financial leverage, as expressed by debt to EBITDA, spiking to the mid-to-high 5x range for year-end 2023. However, the company's 100% franchised business model supports its ability to continue generating free cash flow and provides some protection against existing home sale market downturns provided by its light and flexible cost structure,” the agency said in a press release.

Moody’s noted RE/MAX’s all-floating rate capital structure will hurt the company’s cash flow and interest coverage metrics in the near term such that free cash flow to debt decreases to about 3% and EBITA/interest declines to around 2x over the same period.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.