S&P trims Hanesbrands

S&P said it lowered its ratings for Hanesbrands Inc.’s and senior unsecured notes to B+ from BB- and the company’s $900 million term loan due 2030 to BB from BB+. The 4 recovery rating on the notes indicating average recovery (30%-50%, rounded estimate: 40%) and the 1 recovery rating on the loan are unchanged.

“Given results for the first half of 2023 and continued weakness in the consumer environment, we revised our base case downward and now expect leverage will be elevated over 5x longer than previously forecasted. The company recently reported second-quarter results that were below our expectations due to increasing challenges in the U.S. activewear market and Australia. Total revenue decreased 4.9% given a double-digit decline in activewear (includes Champion brand) while S&P Global Ratings-adjusted EBITDA margin contracted about 470 basis points (bps) to 10.3%,” S&P said in a press release.

However, “In terms of leverage reduction, the company is on track to repay over $400 million of debt with free operating cash flow (FOCF) and reduce inventory to about $1.5 billion by the end of the year. Roughly $100 million of debt has already been repaid year to date, and inventory units are down by double digits as of the second quarter. We view the inventory and debt reduction positively given the immediate benefits to key credit metrics and potential interest expense savings,” the agency said.

The outlook is negative.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.