New Era Cap wants to refinance its existing debt, including the convertible bonds held by a minority shareholder, ACON Investments, after scoring major improvements in sales and profits in the last few months.
The actual revenues of the U.S.-based headwear and apparel company, controlled by the Koch family since its foundation in 1920, remain a closely guarded secret. However, according to Standard & Poor’s, they grew by 66 percent in the 12 months ended Oct. 3, 2021, after declining by 8 percent in the 2020 pandemic year.
The company’s profitability has also improved, helped by price increases and supply chain adjustments. As a result, S&P sees New Era’s debt/Ebitda ratio improving to 2 times by the end of this year from 3x currently.
To refinance its debt, New Era plans to contract a $300 million first-lien term loan due in 2027 and a $150 million asset-based credit facility due in 2026. The latter would allow New Era to draw $50 million for a distribution of dividends to its shareholders. ACON’s notes will converted into preference shares worth about $80 million and common shares representing 15 percent of the ordinary shares.
S&P Global gave a B+ issuer credit rating to New Era, with a BB- rating for the debt. Moody’s assigned a B1 corporate rating to the company and a B2 rating to the term loan.
