S&P Global Ratings today assigned its ‘BB’ issue-level rating to Crocs Inc.’s new $1.18 billion term loan due 2029.
The recovery rating is ‘2’, indicating S&P’s expectation for substantial (70 percent-90 percent; rounded estimate: 85 percent) recovery in the event of a payment default. The company is using the net proceeds from the issuance to refinance the prior $2 billion term loan ($1.18 billion outstanding at June 30, 2023). The transaction is leverage-neutral.
The company had about $2.1 billion of total debt outstanding as of June 30, 2023. The improved recovery prospect for the senior secured debt holders is due to Crocs’ debt repayment, which has reduced the amount of secured term loan debt outstanding at emergence under S&P’s simulated default scenario.
All of S&P’s existing ratings on the company, including S&P’s ‘BB-‘ issuer credit rating and ‘B’ senior unsecured debt rating, are unchanged by the transaction. The outlook is stable. Our ratings continue to incorporate Crocs’ leading brand recognition in the niche clogs footwear market, narrow product focus, and high exposure to fashion trends.
S&P said, “{We expect strong sales momentum to continue through the rest of the year for its Crocs brand from volume growth. Despite lower expectations for Heydude for 2023, we still see growth opportunities for the brand through distribution gains. We forecast leverage in the low-2x area at the end of fiscal 2023.”
The capital structure consists of:
- $750 million secured cash revolver facility maturing in Nov. 30, 2027 (not rated);
- One uncommitted Asia revolver totals around $15 million (not rated);
- $1.18 billion term loan due 2029;
- $350 million senior unsecured notes due 2029; and
- $350 million senior unsecured notes due 2031.
Photo courtesy Crocs
