Centroid Investment Partners, the South Korean private equity company that bought TaylorMade last spring from KPS Partners, is now seeking to refinance the debt used for that transaction. Moody’s and Standard & Poor’s gave relatively favorable ratings to its refinancing plans, noting that TaylorMade’s sales continued to grow strongly last year, reaching a level of $1.4 billion for the 12 months ended Sept. 30, with a positive cash balance of about $200 million.
According to the latest reports, Centroid bought TaylorMade for at last $1.6 billion through an investment vehicle called 19th Holding Golf. The takeover was more expensive than previously reported, resulting in a major capital gain for KPS, which had bought the business from Adidas for just over $400 million.
S&P noted that the golf equipment company’s revenues were up by 20 percent in the third quarter of 2021, despite a tough comparison with the previous year, when TaylorMade’s sales jumped by 60 percent in the second half, driven by rising golf participation during the pandemic. The launch of new products and expansion in Asia will be positive factors, along with the social distancing benefits of golf. The growth rate will decelerate, however, with Moody’s expecting an improvement of about 6 percent in 2022, followed by increases of between 2 and 3 percent per year in both sales and earnings.
To help finance its expensive acquisition of TaylorMade, Centroid plans to obtain a senior term loan of $1.05 billion and a five-year, asset-based revolving credit facility worth $300 million. After the refinancing, TaylorMade will have a debt/Ebitda ratio of around 5.1 times, or about 7 times adding the value of preferred shares issued for the acquisition. Predicting that the leverage will decline to between 4.5 and 4.75 times by the end of 2022, thanks in part to free cash flow of $60 to $70 million per year, Moody’s assigned a B1 corporate family rating to TaylorMade as well as the proposed term loan. S&P gave a B one rating to both.
