S&P trims Franchise Group

S&P said it lowered its ratings on Franchise Group, Inc. to B- from B, the company’s first-lien term loan to B+ from BB- and its second-lien term loan to CCC from CCC+.

“Franchise Group reported revenue declines and an operating loss in the third quarter which were weaker than we expected and we have revised down our 2023 and 2024 estimates. In light of the weak third quarter, we have revisited our forecast and now expect S&P Global Ratings-adjusted group leverage to exceed 6x through fiscal 2024,” S&P said in a statement.

The agency explained, “Overall we believe the company's high debt burden following a management buyout earlier in the year has been compounded by weak operating performance and could lead to its capital structure becoming unsustainable. In addition to the leveraging take-private transaction completed in August, we believe there are increased execution risks associated with timely execution of transactions that could reduce leverage.”

The outlook is negative.

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