CWGS Enterprises LLC Downgraded To 'B+' On Decelerating RV Retail Sales; Outlook Negative


  • CWGS Enterprises LLC (Camping World) reported fourth-quarter and full-year 2018 operating results that were below our expectations. The RV industry is also experiencing excess inventory that is partly caused by a recent and forecast decline in retail RV sales. Therefore, we lowered our forecast for revenue and EBITDA and revised our forecast for adjusted debt to EBITDA to remain above 4x through 2020.
  • We lowered the issuer credit rating on Camping World to 'B+' from 'BB-'.
  • We also lowered the issue-level rating on the senior secured revolver and term loan two notches to 'BB-', based on the lowered issuer credit rating and a revision of the recovery rating on this debt to '2' from '1'. We revised the recovery rating because of an assumed reduction to emergence valuation of recently acquired assets.
  • The negative outlook reflects our forecast for a decline in new RV sales in 2019, new unit price discounting, and uncertainty in the magnitude and duration of weakening retail sales, resulting in the possibility that operating results could underperform our revised base-case forecast.
NEW YORK (S&P Global Ratings) March 12, 2019—S&P Global Ratings today took the 
rating actions listed above. The downgrade to 'B+' reflects our expectation 
for CWGS Enterprises LLC's (Camping World's) lease-adjusted debt to EBITDA to 
be sustained above the 4x downgrade threshold for the previous 'BB-' rating 
through 2020. Uncertainty in the magnitude and duration of weakening retail 
sales in the RV industry contributes to our negative outlook on the company.

The negative outlook reflects our forecast for a decline in new vehicle retail 
sales in 2019, unit price discounting, and uncertainty in the magnitude and 
duration of weakening retail sales, resulting in the possibility that 
operating results could underperform our revised base-case forecast. Based our 
updated forecast for leverage to be in the high-4x area in 2019, there is a 
relatively small cushion compared to the 5x downgrade threshold at the 'B+' 
issuer credit rating over the next year.

We could lower the rating if we believe Camping World will sustain our measure 
of total lease-adjusted debt to EBITDA above 5x. This could result from a 
decline in RV sales that does not stabilize by the end of 2019, incremental 
margin compression, or continued operating losses at Gander locations in 2020 
due to a slow ramp-up. A downgrade would also depend on our assessment of 
fundamentals in the RV industry, including new and used vehicles retail units, 
unit prices, same-store sales, and what the interaction of these fundamentals 
suggest about underlying consumer demand for RVs. We could lower the rating if 
these fundamentals develop unfavorably in a manner that suggests the weakening 
consumer demand will evolve into a sustained and significant down cycle. We 
could also lower the rating if the company pursues leveraging acquisitions 
that sustains our measure of leverage above 5x.

We could revise the outlook to stable if we gain confidence that leverage will 
improve in 2020 with a sustained cushion below 5x through a combination of 
debt repayment and EBITDA growth. This would likely coincide with stabilized 
consumer demand and inventory levels in the RV retail channel. The RV business 
is highly cyclical, therefore an outlook revision to stable would depend on 
our confidence the company can sustain a 0.5x cushion compared to our 
downgrade threshold during times of economic and consumer spending growth.
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