Moody's lowers Madison IAQ

Moody's Investors Service said it lowered Madison IAQ LLC’s senior secured rating to B2 from B1 and the senior unsecured rating to Caa2 from Caa1. The agency also downgraded the corporate family rating to B3 from B2 and the probability of default rating to B3-PD from B2-PD.

“The ratings downgrade reflects the company's failure to reduce its very high financial leverage (measured as adjusted debt/EBITDA) relative to Moody's expectations following the acquisitions of Nortek Air and Big Ass Fans LLC in 2021. The company has yet to deliver the free cash flow Moody's expected at the time of the acquisitions. Moody's believes cost inflation, softness in residential and certain commercial market demand and higher-than-expected working capital investment contributed to the shortfall. Moody's believes the demand within the residential and commercial markets will decline in 2023,” the agency said in a press release.

Moody's warned it sees Madison IAQ's earnings contracting in 2023 and expects debt/EBITDA to remain above 7.5x.

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