Mad Engine Global LLC

This report does not constitute a rating action. Overview Key strengths Key risks Limited fashion risk because inventory has a low obsolescence with products that are not customized or decorated. Narrow product focus and small scale within the licensed, branded, and private-label apparel. Owns production facilities and uses outsource partners for manufacturing and printing needs. Geographic concentration in North America and wholesale channel. Long-standing relationships with licensors. Unsustainable capital structure with high debt burden and associated fixed charges constraining liquidity. Mad Engine sourced about 58% of its total production in 2024 from China. The company has been actively reducing its China exposure by relocating production to other regions, and we anticipate its exposure to China will decline to about 50%

...Tariff exposure could weaken Mad Engine's profitability and cash flow by more than our base-case forecast if mitigation efforts are unsuccessful. Mad Engine sourced about 58% of its total production in 2024 from China. The company has been actively reducing its China exposure by relocating production to other regions, and we anticipate its exposure to China will decline to about 50% of its total cost of goods by mid-2025. The company's Fortune and print- on-demand (POD) segments are produced in Mexico, which represented about 31% of its total production in 2024. The company is actively implementing mitigation efforts in the region. These include headcount reductions in favor of automation, reducing manufacturing subcontracting, and improving processes around sourcing and vendor negotiation to control costs. We believe the company's small scale and sizable exposure to regions with tariffs imposed makes it vulnerable to unfavorable and uncertain business, financial, and economic conditions....

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