Moody's cuts RVR Dealership

Moody's Ratings said it downgraded RVR Dealership Holdings, LLC's corporate family rating to B3 from B2, its probability of default rating to B3-PD from B2-PD and its senior secured term loan rating to B3 from B2. The agency also changed the outlook to negative from stable.

The downgrades reflect RV Retailer's very high lease-adjusted debt/EBITDA of about 12x as of Dec. 31, 2023, and low EBIT/interest coverage of about 0.8x, driven by the significant discounting of overstocked RVs during 2023, which hurt gross margins, as well as the tepid consumer demand environment owing to the high cost of financing RVs. RV Retailer's products are also generally high-priced, premium products and this aspect of its business model makes the company more susceptible to cyclical swings,” Moody’s said in a press release.

Moody's said it forecasts that RV Retailer's lease-adjusted debt/EBITDA will persist at around 8x at the end of 2024 and EBIT/interest to be about 1.3x.

“The improvement in credit metrics from 2023 is dependent on a healthier supply environment for new RVs that aligns more closely with underlying demand. However, the potential for demand to remain subdued or even worsen as a result of high interest rates, and the potential for supply to not adapt quickly enough, could translate into EBIT/interest coverage sustained below 1x and cause free cash flow to turn negative for RV Retailer in 2024. This risk drives the change in the outlook to negative from stable,” Moody’s said.

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