Moody’s Investors Service downgraded the rating on Brunswick Corp.’s debt to junk status, sending the company’s stock down about 22 percent yesterday.
The investment firm downgraded Brunswick's unsecured notes to Ba3 from Baa3 and downgraded its commercial paper rating to not prime from P3. Moody's also assigned a Ba2 corporate family rating and a Ba2 probability of default rating.
Brunswick stock fell to a 25-year low of $3.80 a share following Moody’s announcement, before closing at $4.49 a share yesterday. It opened today at $4.40 and was trading at $4.52 by mid-morning.
"The downgrade reflects our concerns that the continuing turmoil in the financial markets will result in a significant contraction in discretionary consumer spending over the foreseeable future and may put pressure on the company's dealer network and its liquidity position," said Kevin Cassidy, senior credit officer at Moody's Investors Service, in a statement.
Brunswick officials could not be reached this morning for comment.
Last week, Standard & Poor's Ratings Services lowered its long-term ratings on Brunswick Corp., including the corporate credit rating and senior unsecured debt rating, to BB- from BB+.
At the time, Brunswick spokesman Dan Kubera said, “From their comments, their action was based on economic and consumer factors affecting the entire marine industry that are outside of our control.”
In related news, analysts from Rochdale Securities revised downward their earnings estimates for Brunswick because of the continuing slump in U.S. marine sales and an expected slowdown in Europe.
The investment firm now expects Brunswick to report a loss of $1.74 per share for the 2008 full year, compared to previous estimates of a loss of 81 cents per share.
“With MarineMax likely canceling orders and Europe slowing precipitously, we now believe marine sales could decline 18 percent for the year,” said Hayley Wolff, senior equity research analyst for Rochdale Securities, in a report released Monday.
Marine industry sales were off 15 percent at the beginning of 2008, off 25 percent during the summer, and are now trending down about 40 to 50 percent, according to Wolff. Europe, which had been propping up the segment, has weakened sharply, she added.
“This will result in additional production shutdowns,” Wolff concluded.
— Melanie Winters