S&P Global Ratings downgraded the debt ratings of Outerstuff LLC on an increasing likelihood of a default.

Outerstuff, based in New York City, is a manufacturer of licensed children’s sports apparel for sports leagues and colleges.

S&P said Outerstuff’s $155 million term loan matures in December 2023, and its asset-backed lending (ABL) revolver maturity will spring to 90 days ahead of the term loan if the loan is outstanding at that time, which would be early October.
S&P said, “In our view, a default appears to be inevitable within the next six months absent a successful refinancing to address its looming maturities.”

S&P lowered its issuer credit rating on Outerstuff to ‘CCC-‘ from ‘CCC’. S&P’s issue-level rating on the company’s ABL was reduced to ‘B-‘ from ‘B’. The ‘1+’ recovery rating is unchanged. The issue-level rating on the senior secured term loan was lowered to ‘CCC-‘ from ‘CCC’, and the ‘3’ recovery rating is unchanged.

The negative outlook reflects the increasing risk that Outerstuff cannot refinance its near-term debt maturities and S&P’s view that it could default in the next six months.

S&P wrote in its analysis, “The downgrade reflects our view that a default appears to be inevitable within the next six months absent a successful refinancing to address its looming maturities.

“We believe the company’s capital structure is unsustainable and it may need to restructure its balance sheet to address its sizable upcoming 2023 maturities. Its $155 million term loan matures in December, and the $100 million ABL revolver maturity, which is already current, will spring to 90 days ahead of the term loan maturity if the loan is outstanding at that time, which would be early October. We believe there is heightened refinancing risk given volatile market conditions and rising interest rates. Even if Outerstuff can refinance, debt service may become onerous under new terms given current market conditions. We revised our liquidity assessment to weak from less than adequate because we expect Outerstuff’s sources of liquidity over uses will be a substantial deficit over the next 12 months due to the significant upcoming debt maturities.

“The negative outlook reflects the likelihood that we will lower our rating on Outerstuff if it cannot refinance near-term debt maturities and defaults.”