Investing.com -- Moody’s Ratings has downgraded the corporate family rating (CFR) of CWGS Enterprises, LLC, also known as Camping World, to B3 from B2. The downgrade also includes a change in the probability of default rating (PDR) to B3-PD from B2-PD. The ratings on Camping World’s $65 million senior secured revolving credit facility due March 2028 and $1.4 billion senior secured term loan B due June 2028 ($1.3 billion currently outstanding) have also been downgraded to B3 from B2. However, the speculative grade liquidity rating (SGL) of SGL-3, indicating adequate liquidity, remains unchanged. The outlook for Camping World has been updated from negative to stable.

The downgrade is a result of Camping World’s high lease-adjusted debt/EBITDA of 9.1x as of December 31, 2024, and an estimated 8.1x for Q1 2025. The company’s low EBITA/interest of 0.7x as of December 31, 2024, with Q1 2025 estimated at about 0.8x, also contributed to the downgrade. Moody’s expects that the new RV demand environment will be challenging over the next 12 to 18 months due to low consumer confidence, tariff and inflation uncertainty, potential for higher consumer financing rates, and the possibility of credit availability tightening.

The B3 CFR reflects the cyclical nature of RV demand and the expectation of challenging business conditions for RV retailing due to an uncertain economic environment and an increased risk of a recession. Despite these challenges, Moody’s expects Camping World’s other revenue streams, including its large used RV business, RV parts & service, and membership services, to be more resilient.

Camping World’s B3 CFR is supported by its position as the largest RV retailer in a fragmented market and its diversified revenue streams. The company’s focus on lower-priced towables is advantageous in a fragile consumer demand environment. The B3 CFR also indicates Moody’s expectation that Camping World’s financial strategy will remain balanced with a prudent approach to capital allocation, including shareholder returns.

Camping World’s SGL-3 rating is supported by its cash balance of $208 million as of December 31, 2024, and an additional $80 million accessible in the FLAIR offset account. The company’s liquidity profile also benefits from $333.4 million of net cash proceeds from the issuance of Class A Common Equity in November 2024. The company’s maturities are well-laddered, with the $1.4 billion senior secured term loan B due in June 2028 ($1.3 billion outstanding) and the $2.15 billion floor plan facility, inclusive of the undrawn $70 million floor plan revolver, maturing in March 2028.

The stable outlook reflects the expectation that Camping World’s diversified revenue streams will provide a level of revenue support that should help moderate the expected decline in new RV demand. The stable outlook also reflects Camping World’s adequate liquidity and the expectation that it will manage its liquidity and cost structure prudently.

The ratings could be downgraded if liquidity weakens for any reason, including persistent negative free cash flow or if estimated recoveries decline. The ratings could be upgraded if operating performance improves such that debt/EBITDA can be maintained below 5.75x, EBITA/interest expense can be maintained above 1.5x and free cash flow remains strong, all through an industry cycle and if at least adequate liquidity is maintained.

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