Fitness financials: Brunswick risks violating debt covenants as sales continue to plunge, analyst says

Brunswick risks violating debt covenants as sales continue to plunge, analyst says

An analyst said Brunswick Corp. (NYSE: BC) is in danger of violating debt covenants as sales in the boat industry sink amid the global economic slowdown. In addition to its boat portfolio, the company is parent of Life Fitness, Parabody and Hammer Strength.

“Based on our revised forecasts, we estimate that (Brunswick) could trip debt covenants in the December quarter,” RBC Capital Markets analyst Edward Aaron told investors in a research note. “We expect that (it) will be able to manage through these issues, but the risk profile has certainly changed in the past few months.”

Aaron cut his price target on Lake Forest-based Brunswick to $9 from $15, citing the manufacturer’s “deteriorating earnings outlook and growing balance sheet stress.”

“The primary risk to our price target is that Brunswick is not successful in negotiating with its lenders to ensure sufficient liquidity,” Aaron wrote.

Last week, Brunswick said it was cutting 1,400 jobs, shutting four plants and furloughing workers at three more. The company also expects to record two non-cash impairment charges totaling about $496 million before taxes during the third quarter.



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