Moody’s rates Varsity Brands loan B1

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to Varsity Brands Holding Co., Inc., and a B1 rating to the proposed $755 million first-lien senior secured term loan facility due 2021.

The agency also confirmed Herff Jones, Inc.'s existing ratings including the B2 corporate family rating, concluding the review for downgrade initiated on Nov. 5 in connection with the proposed acquisition of the company by Charlesbank Capital Partners and Partners Group.

The outlook is stable.

The company is being acquired by Charlesbank and Partners Group in a transaction valued at $1.52 billion. The acquisition will be financed with the $755 million first-lien term loan, an unrated $330 million second-lien term loan due 2022, an unrated $120 million ABL revolving credit facility expiring in 2019 (undrawn at close) and $482 million of equity from the sponsors.

As a result of the transaction, the company's existing debt issued at Herff Jones will be repaid and its current employee stock ownership plan ownership structure will be terminated.

Moody's said it assigned ratings at Varsity Brands because it is the issuer for the proposed debt, and expects to withdraw the existing ratings at Herff Jones upon completion of the transaction. The confirmation of Herff Jones' ratings reflect the agency’s expectation that the company will reduce and sustain debt-to-EBITDA leverage below 6 times.

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