Investing.com -- Newell Brands Inc. has experienced a downgrade in its ratings, including its Corporate Family Rating (CFR), Probability of Default Rating (PDR), senior unsecured debt instrument ratings, and its senior unsecured medium term notes program ratings by Moody’s Ratings. The downgrade was announced on April 14, 2025, and the outlook remains negative.
The downgrade of the CFR to Ba3 from Ba2, the PDR to Ba3-PD from Ba2-PD, the senior unsecured debt instrument ratings to B1 from Ba3, and the senior unsecured medium term notes program ratings to (P)B1 from (P)Ba3 is a reflection of the continued pressure on Newell’s business. This pressure is due to persistently weak consumer demand and the expected negative impact from US tariffs, which are projected to complicate the company’s ability to reduce its financial leverage.
Newell, which manufactures approximately half of its products in the US and sources only about 15% from China, is expected to experience a negative impact from tariffs, along with their broader effect on the US consumer sector. This is likely to continue to negatively impact consumer spending patterns for discretionary products such as durable goods.
Despite Newell’s larger manufacturing footprint in the US compared to some of its competitors, which provides it with a competitive advantage, and declines in the cost of some inputs, such as oil, gas, and plastic, the company’s ability to implement pricing actions to improve margins will be limited. This is due to the discretionary nature of most of its products and weaker consumer demand.
Newell is also expected to face higher borrowing costs as it seeks to refinance its significant upcoming debt maturities. Higher borrowing costs and the roughly $118 million dividend will negatively impact free cash flow and delay the improvement needed in Newell’s credit metrics and its ability to materially reduce financial leverage.
Over the next 12 months, Newell’s free cash flows, after the payment of dividends, are expected to be slightly negative. This factors in the potential for higher interest costs from refinancing and weaker consumer demand. The company continues to execute its new strategy on its top 25 brands to improve margins, but the magnitude of such gains could be muted by weak consumer confidence, challenges to take pricing, and potential high tariff headwinds.
Newell’s weak liquidity, reflected in the downgrade to SGL-4, is due to upcoming maturities consisting of approximately $47 million outstanding on the 3.9% notes maturing in November 2025 and $1.235 billion remaining outstanding on the 4.2% notes maturing in April 2026. The company is therefore reliant on raising new capital to address the maturities in a more uncertain credit market, which will likely result in higher interest costs and weakened free cash flow.
The Ba3 CFR of Newell reflects its large scale, well-recognized brands, and good product and geographic diversity. However, the rating is constrained by concerns around the long-term growth prospects of the company’s mature product categories, the cyclicality and discretionary nature of some of its products, and the high Debt-to-EBITDA leverage of 6.2x as of December 31, 2024.
The negative outlook reflects risks that leverage could remain elevated over the next 12 to 18 months due to weak consumer demand for discretionary goods, and the execution risk and time necessary to realize benefits from the company’s strategies to improve operating efficiency and margins. Ratings could be upgraded or downgraded based on Newell’s future performance and strategic direction.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.