Authentic Brands Group has proposed a new term loan that it plans to use to support a potential acquisition of Boardriders, Inc., according to a report from Moody’s.
Boardriders, owed by Oaktree Capital Management, has long been rumored to be on the selling block. Boardriders’ six primary brands include Quiksilver, Billabong, ROXY, DC Shoes, RVCA, and Element. Boardriders was formed through the merger of Quiksilver and Billabong in April 2018.
Moody’s assigned a B1 ratings to Authentic Brand Group (ABG) Intermediate Holdings 2 LLC’s proposed senior secured first lien credit facilities, including its extended and upsized $240 million revolving credit facility due 2028, $1.525 billion term loan due 2028, and $600 million delayed draw term loan due 2028.
Moody’s said, “The proceeds of the proposed new term loan will be used to refinance the company’s existing senior secured first lien term loan B4 due September 2024. The proceeds of the delayed draw term loan will be used to finance a potential acquisition of Boardriders, Inc. The ratings are subject to the transactions closing as proposed and review of final documentation.”
Assignments include backed senior secured 1st lien term loan, B1 (LGD3), backed senior secured 1st lien delayed draw term loan, b1 (lgd3) and backed senior secured 1st lien revolving credit facility, assigned b1 (LGD3).
The company’s existing ratings and positive outlook are unaffected.
Moody’s said, “Authentic Brands B2 CFR reflects governance risks, including financial and M&A strategies that have led to high leverage driven by both its acquisitive nature and financial sponsor ownership. Moody’s pro forma debt/EBITDA weakened early in 2022 as a result of the debt associated with the Reebok and David Beckham acquisitions but quickly improved to below 5x pro forma as of September 2022 because of earnings growth and cash-financed acquisitions. The company also has moderate brand and licensee concentrations, and the potential exists for execution challenges associated with its acquisition-based growth strategy.
“ABG Intermediate Holdings 2 LLC benefits from the relatively stable and predictable revenue and cash flow streams it receives in the form of royalty payments from its licensees, which include significant contractually guaranteed minimums and potential overages (payments made in excess of those amounts). The company has exhibited steady operating performance over the past few years, including demonstrated resilience through the coronavirus pandemic. In 2020 full-year revenue and earnings grew over 2019 because of collections on a large portion of guaranteed minimum royalties from licensees, e-commerce growth, effective expense management initiatives and acquisitions. Also, its inherently asset-light licenser business model carries low fixed overhead costs and supports the company’s strong operating margins and associated free cash flow generation. Liquidity is good, supported by balance sheet cash, ample free cash flow and excess revolver availability.”
ABG’s portfolio includes Marilyn Monroe, Elvis Presley, Muhammad Ali, Shaquille O’Neal, David Beckham, Dr. J, Greg Norman, Neil Lane, Thalia, Sports Illustrated, Reebok, Eddie Bauer, Spyder, Volcom, Airwalk, Nautica, Izod, Brooks Brothers, Barneys New York, Judith Leiber, Ted Baker, Hervé Léger, Frye, Juicy Couture, Vince Camuto, Lucky Brand, Aéropostale, Forever 21, Nine West, Jones New York, Tretorn, Prince, Van Heusen, Arrow, Hickey Freeman, Hart Schaffner Marx, and Thomasville.
Photo courtesy Quiksilver