5.11, BOA and Primaloft’s Parent Sees Debt Ratings Affirmed Following Amended Credit Facility

S&P Global Ratings affirmed its credit rating on Compass Group Diversified Holdings LLC (CODI), owner of the 5.11 Tactical, BOA, Primaloft, and Velocity Outdoor businesses in the active lifestyle space, following a recent amendment to its credit facility. The amendment extended the maturities of both its revolving commitments and term loans by six months, to January 2028.

S&P also noted that CODI sold most of its Sterno investment and entered into a sale-leaseback transaction involving some of portfolio company Altor’s assets, using the proceeds to partly pay down its secured term loan. Still, S&P said CODI’s near-term refinancing risks “are elevated, in our view.”

S&P affirmed the ‘B-‘ issuer credit rating on CODI. It also assigned a ‘B-‘ issuer credit rating to the parent,Compass Diversified Holdings.

In addition, S&P affirmed the ‘B+’ rating on CODI’s senior secured debt and the ‘B-‘ rating on the senior unsecured debt. The ‘1’ recovery rating on the senior secured debt was unchanged, and revised the recovery rating on the senior unsecured debt to ‘3’ from ‘4’ on the reduction of leverage as a result of the asset sales.

The negative outlook reflects the uncertainty and the associated challenges that CODI faces as it attempts to strengthen its financial position, remain in compliance with updated covenants, and prepare for the January 2028 maturity of its senior secured credit facility.

CODI’s businesses also include Rimports, Lugano Diamonds, The Honey Pot Company, Altor Solutions and Arnold Magnetic Technologies.

S&P said in its analysis, “The credit profile of Compass Group Diversified Holdings LLC (CODI) improved somewhat in the first half of 2026 following the sale of most of its Sterno investment and the sale-leaseback of some of portfolio company Altor’s assets. These transactions funded the repayment of about $293 million in senior secured term loans, reducing the outstanding amount to $252.3 million as of June 2026 (it was $534 million back in March).

“The company’s leverage improved to 4.82x as of June 30 (versus 5.32x in December 2025), and secured debt to EBITDA improved to 0.66x (versus 1.44x). Notably, it avoided a $4 million milestone fee in June by maintaining a secured debt-to-EBITDA ratio below 1.0x.

“The loan-to-value ratio also improved–to 57.2 percent from 66.0 percent in the first quarter–and we project that it’ll stay between 45 percent and 60 percent over the coming year.

“The company in August 2026 extended the maturity of its credit facility (including revolving commitments and term loans) by six months, which also improved its credit profile–but near-term refinancing risks remain elevated. While the amendment reduced the revolving commitment to $54 million from $100 million, we believe the company’s near-term liquidity is adequate to meet its immediate requirements.

“Nevertheless, given that the maturity date was only extended by six months (to January 2028), we believe the company continues to face elevated near-term refinancing risks. CODI must address its $252.3 million outstanding term loan by year-end; failing to do so will result in a $4 million milestone fee. Management expects to carry out one or more asset sales over the next few months and use the net proceeds to pay down debt, but there’s still uncertainty about the size and timing of any transactions.

“CODI entered into a new management services agreement in July 2026, which we think will improve shareholder alignment and operational efficiency. The agreement, which takes effect on Jan. 1, 2027, will lower the base management fee to 1.25 percent from 2 percent and will introduce a new incentive structure tied to operating performance and shareholder returns. This restructuring is expected to drive significant cost savings of $19 million-$22 million annually, according to the company’s expectations.

“The amendment will also strengthen the company’s governance profile by implementing claw back protections and increasing oversight by the board of directors’ compensation committee. This would effectively align management’s long-term incentives with those of CODI’s shareholders.

“We believe the company’s eight investments outside of Lugano are performing well, and we think they would provide CODI with some financial flexibility, if needed. At the same time, there’s still uncertainty about which assets, if any, CODI will look to sell over the next few months–a process that could take time.

“The company’s portfolio consists of small, niche, privately held, low-speculative-grade investments (‘B’ weighted-average estimated credit quality), but we believe those investments have significant value relative to CODI’s debt. The company has a good record of selling businesses at profitable valuations.

“The negative outlook reflects the uncertainty and the associated challenges that CODI faces as it attempts to strengthen its financial position, remain in compliance with updated covenants, and prepare for the January 2028 maturity of its senior secured credit facility. Our expectation is that the company will take steps to stay compliant with its financial filing requirements in 2026 and avoid any material contingent expenses or liabilities associated with Lugano..”

Images courtesy CODI