S&P gives Stitch, loan B

S&P said it gave B ratings to Stitch Acquisition Corp. and its planned $350 million senior secured term loan due 2028. The recovery rating is 3, reflecting an expectation for meaningful (50%-70%; rounded estimate: 55%) recovery in default.

Stitch was formed to acquire SVP Worldwide from Ares Management for $484 million.

“The ratings reflect the company's small scale and scope, narrow business and product focus, and raw material cost volatility, notwithstanding its leading market position and high brand recognition in the niche household sewing machine industry. With around $550 million in revenue for the last 12 months ended March 31, the company lacks meaningful scale and is narrowly focused in a mature industry that could revert to sub-par growth once global economies reopen,” S&P said in a press release.

The outlook is stable. The outlook reflects the view that the company's revenue and EBITDA will reset in a normalized environment post the pandemic, leading to adjusted leverage deterioration to the mid-5x area in 2022, followed by low-single-digit topline and EBITDA growth that results in a modest improvement in adjusted leverage to around 5x by 2023, the agency said.

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