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Related Issuers
Rating Action:

Moody's upgrades Brunswick's CFR to Ba3; outlook is stable

Global Credit Research - 20 Apr 2012

New York, April 20, 2012 -- Moody's Investors Service upgraded Brunswick Corporation's ("Brunswick") Corporate Family Rating to Ba3 from B1 due to significant enhancements in its operating performance and credit metrics and Moody's expectation that there will be further improvement. The outlook is stable.

"We believe that the continuing demand for pontoon and aluminum boats, the increasing age of licensed boats and fewer used boats for sale will help drive demand for new fiberglass boats in the future," said Kevin Cassidy, Senior Credit Officer at Moody's Investors Service. "Brunswick's improved cost structure, commitment to debt repayment and stabilizing marine demand trends have led to a meaningful improvement in earnings and credit metrics," he noted.

The following ratings were upgraded:

Corporate Family Rating to Ba3 from B1;

Probability of Default Rating to Ba3 from B1;

$575 million senior unsecured notes due 2013-2027 ($355 million outstanding) to B2 (LGD 6, 92%) from B3 (LGD 6, 90%);

$350 million senior secured notes due 2016 ($288 million outstanding) to Ba1 (LGD 2, 23%) from Ba2 (LGD 2, 27%);

The following rating was affirmed:

Speculative grade liquidity rating at SGL-1

RATING RATIONALE

Brunswick's Ba3 Corporate Family Rating reflects the highly discretionary nature of pleasure boats and marine related products, which makes Brunswick's revenues and earnings highly sensitive to economic weakness. This was demonstrated during the economic downturn when the company suffered a dramatic revenue and earnings decline. But the ratings also reflect the company's moderate leverage and solid interest coverage -- highlighted by debt/EBITDA under 4 times and EBITA/interest over 2 times. Moody's expects additional operating performance and credit metrics improvement as the company pays down debt with free cash flow and marine industry demand continues to stabilize. A critical component of the rating is Brunswick's strong liquidity profile. Other factors supporting the rating are: the relatively stable boating participation trends, good operating performance of Brunswick's dealership network and the company's strong parts & accessories business. The company's stable Bowling & Billiards and Fitness businesses, seasoned management team and its joint venture agreement with General Electric Capital Corporation for its floorplan financing also support the rating.

The stable outlook reflects Moody's expectation that marine demand trends will improve in the year ahead and that Brunswick will continue to maintain very strong liquidity. Moody's expects that Brunswick will expand on its cost efficiency efforts as needed and will continue to reduce debt with free cash flow. That said, Moody's does not expect operating performance or credit metrics to improve sufficiently over the next 12-18 months to justify an upgrade.

Because of Brunswick's sensitivity to macroeconomic conditions, its credit metrics need to be stronger than other similarly-rated consumer durable companies. Credit metrics necessary for an upgrade are debt/Ebitda below 3 times (currently 3.9 times), high single digit Ebita/revenue margins (currently around 7.1%) and EBITA/interest approaching 3 times (currently 2.1 times). Additionally, liquidity must stay strong for an upgrade to be considered. For the debt/ EBITDA upgrade threshold to be met, future EBITDA needs to increase by about $110 million or debt needs to decrease by around $330 million from year end levels.

Credit metrics which could prompt a downgrade would include debt/EBITDA sustained above 4.5 times, mid single digit Ebita/revenue margins or interest coverage approaching 1.5 times. Additionally, if the company's liquidity profile deteriorates, the long term rating and liquidity rating could be downgraded. For the debt/ EBITDA downgrade threshold to be met, future EBITDA needs to decrease by about $70 million or debt needs to increase by around $350 million from year end levels.

Subscribers can find further details in the Brunswick Credit Opinion published on Moodys.com.

The principal methodology used in this rating was the Global Consumer Durables published in October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Brunswick is headquartered in Lake Forest, Illinois. The company manufactures marine engines, pleasure boats, bowling capital equipment and fitness equipment, and operates retail bowling centers. Sales for the year ended December 31, 2011 approximated $3.7 billion.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Kevin Cassidy
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades Brunswick's CFR to Ba3; outlook is stable
No Related Data.

 

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