Moody’s Investors Service assigned a B1 rating to the proposed term loan of Great Outdoors Group, LLC, the corporate name of Bass Pro Group. Concurrently, Moody’s affirmed the company’s Ba3 corporate family rating (CFR) and Ba3-PD probability of default rating (PDR). The outlook remains stable.

S&P said proceeds from GAO’s proposed $4.5 billion term loan due 2028 and $1.2 billion balance sheet cash will be used to refinance the company’s existing $4.1 billion term loan due 2024, pay for its Sportsman’s Warehouse acquisition, fund a minority shareholder equity redemption and general corporate purposes.

Proposed term loan took the following rating actions for Great Outdoors Group, LLC:

  • Corporate family rating affirmed Ba3;
  • Probability of default rating affirmed Ba3-PD;
  • Senior secured term loan B due 2028, assigned B1 (LGD4);
  • Outlook remains stable; and
  • The rating on the existing term loan due 2024 will be withdrawn at close.

Ratings Rationale
Moody’s said, “GAO’s Ba3 CFR is supported by its well-recognized brand names and leading position in the outdoor recreational products retail sector. The company’s margins benefit from its sizable and stable credit card income stream and significant owned brand penetration. In addition, GAO’s business model as a destination experiential retailer sets it apart from mass market and big-box competitors that do not provide the level of in-store customer service that is the foundation underpinning its loyal customer base. Further, its diverse product assortment and value price points mitigate earnings pressure in economic downturns. The Sportsman’s Warehouse acquisition will further increase GAO’s scale and is a good strategic fit since it serves a very similar customer demographic and expands the company’s presence into complementary geographic regions. Given the successful integration of Cabela’s since its 2016 acquisition, Moody’s expects Sportsman’s Warehouse integration risk to be modest and synergies to be realized over time from cost reductions and introducing GAO’s owned brands.

“GAO’s credit profile is constrained by its high leverage. Moody’s estimates Pro-forma debt/EBITDA to be 4.4x and EBIT/interest expense 2.6x, based on GAO’s preliminary 4Q 2020 results and Sportsman’s Warehouse LTM Q3 2020. GAO’s revenues and company adjusted EBITDA grew by approximately 15 percent and 32 percent respectively in 2020, as a result of pandemic-driven lifestyle changes and increased participation in outdoor activities. However, operating performance could weaken over the next 12-to-24 months once health and safety concerns abate, leading consumers to pivot back to other spending categories such as travel and entertainment. Moody’s projects leverage increasing towards 4.9x and EBIT/interest expense declining to 2.2x. The rating also reflects the company’s aggressive financial strategies, including its use of cash flow and incremental debt for member distributions, the redemption of preferred and common equity interests issued by Bass Pro’s parent. In addition, as a retailer, Bass Pro needs to make ongoing investments in its brand and infrastructure, as well as in social and environmental drivers including responsible sourcing, product and supply sustainability, privacy, and data protection. The company’s ongoing offering of firearms and ammunition at a time when several other large retailers have reduced their offerings in the category also represents a social consideration.

“Moody’s expects the company to have good liquidity over the next 12-to-18 months. Moody’s expects free cash flow to be modestly positive in 2021. Liquidity will also be supported by access to an undrawn $1.275 billion asset-based revolver, Moody’s expects to have ample availability at all times.

“The stable outlook reflects Moody’s expectation that despite a likely normalization in demand in the outdoor, firearms and sports categories in 2021 following the surge in 2020, credit metrics will remain in line with the Ba3 rating and the company will have good liquidity over the next 12-to-18 months.”

Photo courtesy Bass Pro