Wahoo issues statement following second ratings agency credit downgrade

In January we reported on the downgrading of the credit rating of Wahoo, which was slashed from CCC to -CCC by S&P Global Ratings, outlining a view that, in the near future, a default scenario might be on the horizon for the business, were it not to raise new capital.

Today we have received the following statement, directly addressing the 10th of April announcement of Moody’s downgrade:

“Wahoo has made a special agreement to delay our scheduled interest and principal payment with our lenders for our long term note and revolving credit facility.”

“The credit agencies define a default as any missed interest or principal payment, regardless of any prearranged agreement.”

“We are actively collaborating and moving forward positively with the support of our lenders and our private equity partner Rhone – to create a new capital structure that meets the long term needs of the business.”

“In the meantime, Wahoo remains committed to providing the best products and experiences for our customers and remaining true to our mission of building a better athlete in all of us.”

With 2 of the big 3 credit ratings agencies raising concerns regarding the finances of the business the statement raises further concerns.

Recent investment

The structure of the July 2021 investment in Wahoo saw founder and Chairman Chip Hawkins and the company’s management team make significant reinvestments alongside Rhône. Wahoo’s existing private equity investor, Norwest Equity Partners (“NEP”), continues to own a minority investment in the company.

Future outlook

S&P and Moody’s make up 2 of the ‘big 3’ credit ratings agencies, organisations that evaluate the financial strength of businesses. The grading scale runs from AAA, seen as ‘prime’ investments, to D, or ‘in default’. The – CCC which Moody’s has issued for Wahoo represents a ‘Default imminent, high concern about recovery prospects’ rating.