S&P flips Power Stop view to positive

S&P said it switched its outlook for Power Stop LLC to positive from negative and affirmed its CCC+ ratings on the company and its senior secured debt. The 3 recovery rating on the debt is unchanged.

“Power Stop's sales, margins and liquidity position have improved, and we now expect it to reduce leverage and generate free cash flow. Power Stop's sales and EBITDA increased during the first half of 2023 compared to the prior year as its unit volumes grew and shipping container freight costs fell; this led to better operating leverage and margins. Although weaker consumer demand could impair its credit metrics over the next 18 months, the company should have easier comparisons in the back half of 2023, and we now expect revenue growth of 7.5% this year,” the agency said in a press release.

S&P said it forecasts the company’s EBITDA margins to widen toward the mid- to high-teen percent range compared to nearly 10% in 2022.

“The positive outlook reflects that Power Stop improved its liquidity position and that we could upgrade it over the next 12 months if the company's sales volumes continue to recover, shipping container costs stabilize, and it can better manage inventory levels to sustainably generate positive FOCF,” S&P said.

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