Vista Outdoor Inc. said Monday that it had completed its $412.5 million acquisition of CamelBak Products Inc. from Compass Diversified Holdings Inc. and disclosed plans to sell $300 million in unsecured debt to repay a portion of its existing indebtedness and for general corporate purposes.
Vista Outdoor said the notes will be senior unsecured obligations of Vista Outdoor and will be guaranteed on a senior unsecured basis by certain of its existing and future domestic subsidiaries. They will mature in 2023.
Vista Outdoor announced its plan to acquired CamelBak Products Inc. July 27, a week after paying $40 million cash to acquire standup paddleboard (SUP) manufacturer Jimmy Styks LLC.
On Monday, Moody's Investors Service assigned a Ba2 Corporate Family Rating (CFR) to Vista Outdoor and a Ba3 rating to Vista's $300 million senior unsecured notes. Moody's also assigned an SGL-1 speculative grade liquidity rating and said its rating outlook for the company is stable.
“Proceeds from the notes together with revolver borrowings and cash on hand will be used to fund Vista's $412.5 million acquisition of CamelBak and $40 million acquisition of Jimmy Styks announced last month,” said Kevin Cassidy, Senior Credit Officer, at Moody's Investors Service.
Moody's Ba3 rating on the senior unsecured notes is one notch lower than the Ba2 CFR. The notes are guaranteed by the company's domestic operating subsidiaries. The Ba3 rating reflects its structural subordination to the unrated secured credit facility ($350 million term loan and $400 million revolver).
The SGL-1 Speculative Grade Liquidity rating reflects Vista's very good liquidity profile, highlighted by cash balances of around $40 million, a manageable debt maturity schedule with no significant maturities until 2020 (term loan and revolver), access to a $400 million revolving credit facility, and Moody's expectation of $150 to $200 million of free cash flow in fiscal 2016 with capital expenditures estimated around $45 million for the year. Moody's expects adequate headroom of at least 40% under financial covenants (leverage and interest coverage) over the next year. Moody's anticipates about $100 million of share repurchases in fiscal 2016.
UT-based Vista Outdoor earned about 65 percent of its sales from its Shooting Segment in the fiscal year ended March 31, but has pegged much of its growth to its Outdoor Products segment, which has acquired the Bushnell optics and Jimmy Styx SUP business in the last year, and is expected to add CamelBak within the month. The company's top shooting brands include Savage Arms, Federal
Premium, and American Eagle. The majority of revenue in shooting sports
comes from ammunition.
Compass Diversified (CODI) said Monday that after the allocation of the sales price to non-controlling equity holders and the payment of transaction expenses, it received approximately $367.8 million of total proceeds from the sale at closing. The proceeds will be used to repay all outstanding debt under CODI's revolving credit facility, with the balance increasing cash on its balance sheet. CODI anticipates recording a gain on the sale of CamelBak ranging between $150 million and $170 million during the quarter ended Sept. 30, 2015.
