Standard & Poor’s confirmed its B issuer credit rating for the Authentic Brands Group (ABG) after its decision to bring in two new investors, HPS Investment Partners and CVC Capital, instead of raising new capital by going public. As reported, they both purchased some of the existing shareholders’ shares.
Instead, ABG is planning to finance Reebok’s $2.1 billion takeover by borrowing money - $1,675 million through a senior secured first-lien term loan, and $500 million through a senior secured second-lien term loan. S&P assigned a B credit rating to the first-lien loan and a CCC+ rating to the second-lien loan, noting that ABG’s debt-Ebitda ratio will remain above five times because of its acquisitive strategy.
Commenting on the future of Reebok, S&P warned that the competition with Adidas, Nike and other brands will be fierce. On the other hand, the agency expressed a note of optimism by likening Reebok’s takeover by ABG to Hanesbrands’ acquisition of Champion, which has successfullly made use of “nostalgic characteristics” to rapidly grow its revenues.
S&P noted that Jamie Salter, CEO of ABG, wants Reebok to double down on Reebok’s basketball heritage, bringing back iconic styles like The Pump along with endorsees from the 1990s like Shaquille O’Neill, who is a shareholder of ABG, and Allen Iverson.
As reported in Footwear News, Shaq was a moving force in ABG’s decision to bid for Reebok. Lots of Shaq branded shoes are due to be launched in the market.
We wonder whether Reebok will also continue its involvement in fitness, which was one of the drivers for its early successes.
