Stock Markets June 30, 2026 04:06 PM

Moody’s Moves Holley Outlook to Stable, Affirms B2 Rating Amid Cash Flow Expectations

Ratings agency points to steady profitability, portfolio optimization and expected free cash generation over the next 12-18 months

By Leila Farooq
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Moody’s affirmed Holley Inc.'s B2 corporate family rating and probability of default rating, while shifting the outlook from negative to stable. The change reflects the expectation that Holley will sustain healthy profitability, generate at least $20 million in free cash flow in 2026 and 2027, and maintain moderate financial leverage with debt/EBITDA around 5.0x by end-2026.

Moody’s Moves Holley Outlook to Stable, Affirms B2 Rating Amid Cash Flow Expectations
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Key Points

  • Moody’s affirmed Holley’s corporate family rating at B2 and probability of default at B2-PD, while changing the outlook to stable from negative.
  • The outlook change is based on expectations of modest revenue growth, improved earnings through operational initiatives and portfolio optimization, and free cash flow of at least $20 million in 2026 and 2027.
  • Moody’s projects debt/EBITDA of about 5.0x at the end of 2026, an EBIT margin between 13.5% and 14.0%, and notes liquidity support from a $100 million revolver with $88 million available as of March 29, 2026.

Moody's Ratings on Tuesday upheld Holley Inc.'s corporate family rating at B2 and its probability of default rating at B2-PD, while also affirming the company's senior secured bank credit facility ratings at B2. At the same time, the ratings agency revised Holley's outlook from negative to stable and kept the speculative grade liquidity rating at SGL-2.

The change in outlook reflects Moody's expectation that Holley will sustain solid profitability and moderate leverage while producing meaningful free cash flow over the coming 12 to 18 months. The agency anticipates modest top-line growth and operational measures that will lift earnings and cash flow, projecting debt to EBITDA of about 5.0x by the end of 2026.

Moody's described Holley's B2 corporate family rating as driven by the company's relatively modest scale, the demand sensitivity associated with discretionary performance automotive products, and its moderately high financial leverage. The rating also recognizes Holley's competitive standing within the niche performance automotive aftermarket, a strong operating margin, and what Moody's views as good liquidity.

On revenue expectations, Moody's projects low single-digit growth for Holley in 2026 and 2027, even as the company exits lower margin and unprofitable businesses. The agency noted that Holley's revenue had declined modestly for three consecutive years through 2024 before returning to growth of approximately 2% in 2025. In its operating-margin outlook, Moody's expects Holley to maintain an EBIT margin in the range of 13.5% to 14.0% over the next 12 to 18 months, benefiting from portfolio optimization and the planned elimination of more than 11,000 stock-keeping units.

Moody's SGL-2 speculative grade liquidity rating reflects the agency's expectation that Holley will have adequate liquidity in the near term. The firm expects Holley to preserve a sufficient cash balance while generating positive free cash flow of at least $20 million in both 2026 and 2027. Supporting that view is a $100 million revolving credit facility that matures in 2029, which had $88 million of availability as of March 29, 2026.

The ratings action leaves intact the key numerical assessments and liquidity metrics: B2 corporate family and bank facility ratings, B2-PD default rating, SGL-2 liquidity rating, projected debt/EBITDA of roughly 5.0x at the end of 2026, an anticipated EBIT margin between 13.5% and 14.0%, and expected free cash flow of no less than $20 million annually in 2026 and 2027. The outlook shift to stable signals that Moody's currently views the company's financial trajectory as consistent with maintaining its current ratings over the coming year to year-and-a-half.


Context for markets and stakeholders

For participants in the performance automotive aftermarket and credit providers to companies in that sector, Moody's commentary underscores a view that Holley is navigating portfolio changes and margin improvements while preserving liquidity. The projected stabilization of leverage and the expectation of positive free cash flow are central to the ratings agency's more sanguine near-term outlook.

Risks

  • Demand risk inherent to discretionary performance automotive aftermarket products could pressure revenue if consumer spending weakens, affecting Holley’s sales trajectory.
  • Moderately high financial leverage - with debt/EBITDA expected near 5.0x - means deviations from expected cash flow could strain credit metrics and liquidity.
  • Revenue attrition as the company exits lower-margin and unprofitable businesses could limit near-term top-line growth despite anticipated margin benefits.

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