Moody’s Investors Service placed the ratings of Boardriders S.A. on review for upgrade, including its Caa1 Corporate Family Rating, Caa1-PD Probability of Default Rating and Caa1 rating on its 9.5% Senior Notes due 2020. Boardriders S.A. is a Luxembourg-based indirect subsidiary of Boardriders, Inc.
The review was prompted by the announcement that Boardriders’ signed a definitive agreement to acquire all of the shares of Billabong International Limited for Australian$1.00 per share, for a total enterprise value of A$380 million, or 7.4 times Billabong’s pro-forma FY17 earnings before interest, tax, depreciation and amortization. The transaction is expected to close in April 2018.
“The transaction combines the two premier companies in the global action sports apparel industry with complementary business philosophies, product offerings and geographic footprints, which could potentially drive material cost savings over time,” stated Moody’s Apparel analyst, Mike Zuccaro. “These potential strategic benefits have prompted our review for upgrade.”
Ratings placed on Review for Upgrade:
..Issuer: Boardriders SA
…. Corporate Family Rating at Caa1
…. Probability of Default Rating at Caa1-PD
…. Senior Unsecured Regular Bond/Debenture at Caa1(LGD4)
Outlook Actions:
..Issuer: Boardriders SA
….Outlook, Changed Rating Under Review from Positive
RATINGS RATIONALE
While both companies have made progress in recent operational turnaround efforts, a meaningful amount of uncertainty remains with regards to sustainably in light of ongoing challenged in the global apparel and footwear industry. The transaction will also give rise to significant integration risk, and the company’s final capital structure has not yet been disclosed.
The review will focus on recent operating performance and the level of integration risk associated with the transaction, as well as the amount and timing of any potential synergies. It will also focus on how the transaction will be financed and the timing of operating and credit metric improvement following closing of the transaction. Moody’s notes that the review could extend longer than 90 days in the event of a lengthy regulatory review of the transaction.
Photo courtesy Billabong
