Moody’s Ratings downgrades Crash Champions credit rating

Champions Financing Inc. was downgraded to a Caa1 long-term rating, according to a Moody’s report released last week. 

Moody’s report “Update to credit analysis following downgrade to Caa1” states the company has weak operating performance, very high leverage, and weak free cash flow, which is predicted to persist for some time. 

The Caa rating is described by Moody’s as highly speculative and is likely in or very near default with some prospect of recovery of principal and interest. 

It notes the company has multiple positive attributes, including a “solid market position as the third largest MSO in the highly fragmented collision repair industry. It also has strong relationships with leading national insurance companies, and long-term demand fundamentals are strong as vehicle miles traveled grow and repair severity continues to rise.”

“However, despite these positives, as a result of high debt levels under its private equity ownership and lower than expected EBITDA, credit metrics have been persistently weak and liquidity is only adequate,” the report says. “As of Q2 2025, LTM debt/EBITDA was about 9.1x on a lease-adjusted basis and about 15x on a funded debt basis while EBITA/interest coverage was 0.4x and free cash flow was -$61 million.”

Moody’s expects credit metrics weakness to continue for the rest of the year. It says the company could rebound in the back half of 2026 if there is a rebound in the overall industry for repairable claims and solid progress on top-line growth initiatives and credit metrics. 

The report lists factors that could lead to an upgrade, such as: 

• • EBITA/interest coverage is sustained above 1.0x
  • Crash Champions demonstrates sustained positive free cash flow to debt and at least adequate liquidity
  • Consistency in meeting operational and financial targets and internally funding discretionary growth initiatives is required for an upgrade of the ratings.

Factors that could lead to a downgrade include: 

• • Liquidity weakening
  • Operating performance fails to improve, such that leverage reaches more sustainable levels
  • Likelihood of default increases for any reason

According to the report, Crash Champions has an ESG credit impact score of CIS-5, which is the highest level of negative impact on Moody’s five point scale. 

The company has moderate exposure to environmental and social risks, which are factored into the rating. However, Moody notes that the rating is due to governance practices, including aggressive financial strategies under private equity ownership and very high leverage. 

IMAGE

Featured image: The Crash Champions logo is shown. (Provided by Crash Champions via PRNewsFoto)