S&P gives Gibson, loan B-

S&P said it gave Gibson Brands Inc. and its planned $250 million term loan B- ratings. The loan’s recovery rating is 3, indicating an expectation for meaningful (50%-70%; rounded recovery: 50%) recovery.

“The B- issuer credit rating on Gibson Brands reflects its small size in a niche and fragmented industry, moderate brand concentration, the discretionary high-ticket nature of its products, weak free operating cash flow (FOCF) generation in the near term and lack of a track record of stable operating and financial performance since emerging from bankruptcy in 2018,” S&P said in a press release.

Gibson plans to use the proceeds to pay a $225 million distribution to its shareholders, including the majority shareholder KKR, which took control of the company post-bankruptcy in 2018, pay $9 million in fees and expenses and fund $16 million cash to the business.

“We forecast the company will need to continuously invest internally generated cash flows, leaving little to no headroom for debt repayment,” S&P said.

The outlook is stable, reflecting an expectation Gibson will continue improving profitability through higher sales and stronger operating efficiency, enabling it to continue deleveraging to the mid-4x area over the next 12 months, the agency said.

© 2015 Prospect News.
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