Moody’s Investors Service said it cut Fleetwood Enterprises Inc.’s corporate family rating and probability of default rating to ‘Caa3’ from ‘Caa1’ with a negative outlook.
According to Moody’s, the downgrade reflects the potential that Fleetwood may experience a significant cash burn over the next 12 to 18 months resulting from the eroding demand in the recreational vehicle and manufactured housing sectors.
Fleetwood will likely continue with its asset sales and pledging of assets to make up any cash shortfalls.
However, Moody’s believes that meeting operating cash requirements through asset sales or the pledging of assets is not reflective of a sustainable long-term business model.
The negative outlook reflects Fleetwood’s difficult operating environment resulting from the weak U.S. economy and the weak credit market for retail purchases of RVs and manufactured homes.
Despite the restructuring activities, including asset sales and the recent equity infusion, Fleetwood faces considerable challenges to restore a business model that is able to generate positive earnings and cash flow, Moody’s said.