Sycamore Partners, the parent of Pure Fishing, recently repurchased the fishing company’s $255 million second-lien term loan at a significant discount to face value, according to a report from S&P Global Ratings.
S&P further said it believes Sycamore repurchased about a quarter of the company’s first-lien term loan through a series of open market transactions at a deep discount to face value over the past several months.
In its press release, S&P said, “We consider the second-lien transaction to be a distressed exchange and tantamount to default because of Pure Fishing’s ongoing cash burn and need for additional liquidity this year, as well as its lenders’ receipt of less than par value without adequate offsetting compensation. For the same reasons, we also view the open market transactions as tantamount to a default and Sycamore’s repurchase of a significant portion at a deep discount to par as constituting a debt restructuring.”
As a result, S&P lowered its issuer credit rating on Pure Fishing to ‘SD’ (selective default) from ‘CCC’. At the same time, S&P lowered its issue-level rating on its first-lien term loan to ‘D’ (default) from ‘CCC’. In addition, S&P updated its recovery analysis to reflect the new debt in Pure Fishing’s capital structure that reduces the residual value of its U.K. subsidiaries, which was previously available to the first-lien lenders. Therefore, S&P views the recovery prospects for the first-lien lenders as moderately worse and lowered its rounded recovery estimate to 35 percent from 45 percent. The ‘4’ recovery rating is unchanged.
S&P said in its analysis, “Pure Fishing continues to struggle because of the retail customer de-stocking that has affected the entire industry this year and we expect very weak credit metrics through 2024. We continue to believe the company’s capital structure is unsustainable due to our expectations for high leverage through 2024, with no room for operating missteps or unexpected headwinds. We expect Pure Fishing’s cash flow will be insufficient to cover its fixed charges, which increases the possibility of another restructuring or a conventional default in the next 12 months. We will update our base-case forecast and reassess our ratings on Pure Fishing as soon as practical over the next few days. At that time, we will likely raise our issuer credit rating to ‘CCC’.”
Sycamore Partners completed its acquisition of Pure Fishing from Newell Brands in January 2019. In February 2022, The business includes Abu Garcia, Berkley, Fenwick, Hardy, Penn, Pflueger, Shakespeare, SpiderWire and Ugly Stik. In February 2022, Pure Fishing acquired Svendsen Sport, a supplier of fishing tackle in Europe and owner of brands in that market including Savage Gear, Prologic, MadCat, WaterWolf, and DAM.
Photo courtesy Pure Fishing
