Mad Engine Global LLC

Overview Key strengths Key risks Limited fashion risk as inventory has a low risk of obsolescence with products that are not customized or decorated. Narrow product focus and small scale within the licensed, branded, and private-label apparel and accessories industry. Leverages its own production facilities and outsourced partners for its manufacturing and printing needs. Geographic concentration in North America and wholesale channel. Long-standing relationships with its licensors. Unsustainable capital structure with high debt burden and associated fixed charges constraining liquidity. Mad Engine?s EBITDA interest coverage remained near 1x in fiscal 2023. The company?s fixed-charge base, particularly debt amortization of approximately $8 million on its $310 million senior secured term loan and $51 million of interest, remains a large use of

...Mad Engine Global LLC's interest coverage remains weak due to its unsustainable capital structure. Mad Engine's EBITDA interest coverage remained near 1x in fiscal 2023. The company's fixed-charge base, particularly debt amortization of approximately $8 million on its $310 million senior secured term loan and $51 million of interest, remains a large use of cash. We forecast that while Mad Engine will generate approximately $51 million of S&P Global Ratings- adjusted EBITDA in 2024, interest coverage will improve to 1x in the next year. Therefore, we believe the company's capital structure remains unsustainable until profitability improves such that it sustains interest coverage over 1.5x, alleviating our concerns over its ability to meet its debt service requirements. We expect Mad Engine's cash flow generation should weaken in 2024 as it makes necessary working capital investments to grow the business. Mad Engine generated approximately $21 million of free operating cash flow (FOCF) in...

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