Wahoo Fitness: Downgraded By S&P
9/12/2022: We’ve not found the original article as yet, but a Twitter post on September 12, 2022 says Wahoo Fitness Acquisition LLC has been downgraded by S&P:
This is bad news for the two BDCs with exposure to the fitness company: Main Street Capital (MAIN) and Capital Southwest (CSWC). The former has invested $14.4mn in the company’s first lien senior loan due in August 2028. The latter is in the same loan in its I-45 joint venture with…MAIN for $4.8mn Both lenders have already discounted their positions by (12%) as of June 30, 2022, suggesting credit deterioration has been underway for a little while. Still, back at the end of the IQ 2022, the debt was valued at par.
We had already added Wahoo Fitness to the underperformers list as of the IIQ 2022 with a CCR 3 rating. This latest move – coming relatively recently after the company was acquired and with the Peloton story in mind – causes us to move Wahoo Fitness to CCR 4. We would be the first to admit we don’t yet know what’s going wrong, but a (75%) drop in EBITDA cannot be ignored. There’s the prospect here of several million dollars being lost – first lien standing notwithstanding.
We’ll be keeping an eye out for more and better information.