S&P Global Ratings lowered the debt ratings of YS Garments, LLC, doing business as Next Level Apparel, after the family-founded blank apparel specialist amended its credit agreement to extend the maturities of its capital structure.
The maturities on the facility, consisting of a $203 million outstanding first-lien term loan and a $41.2 million revolving credit facility, were extended to August 2027 from August 2026 and February 2026, respectively. Equity holders contributed $20 million of Class F capital.
S&P said the amendment “allows for a portion of cash interest on these borrowings, nearly all its outstanding debt, to be converted to payment-in-kind (PIK) for the next three quarters through September 2026 at the company’s election. It also includes an amortization holiday through 2026 and relief from its total net leverage covenant until September 2027.”
S&P continued, “We view the transaction as distressed and tantamount to default because the amortization holiday and conversion of its debt to allow for part-cash and part-PIK interest at the company’s election slows timing of payments compared with the original promise. High leverage, weak profitability, and tight credit market conditions have delayed its ability to refinance on satisfactory terms, and we believe there was a realistic possibility Next Level would experience a default over the near term. Therefore, we lowered our issuer credit rating and issue-level ratings on Next Level’s first-lien debt to ‘D’ from ‘CCC-’. We will reassess our ratings in the coming days.”
Image courtesy Next Level Apparel
