Moody's rates Outerstuff loan B2

Moody's Investors Service said it assigned a B1 corporate family rating and a B1-PD probability of default rating to Outerstuff LLC and a B2 (LGD5) rating to the company's proposed $155 million senior secured term loan due 2021. Its $100 million asset-based revolving credit facility is unrated. The outlook is stable.

Proceeds from the term loan will be used to finance a return of capital to shareholders. The transaction follows the acquisition by private equity funds affiliated with Blackstone Group of about 50% of Outerstuff equity in May. The initial acquisition was funded entirely with equity.

The agency said the B1 corporate family rating reflects Outerstuff's key-man risk stemming from reliance on founder and chief executive officer Solomon Werdiger, its revenue concentration with several sports leagues, its small scale, its narrow product concentration, risks associated with private equity ownership and the joint control by management and the private equity sponsor.

In Moody’s view, these risks are mitigated by the company's good credit metrics compared to those of similarly rated apparel peers. Pro forma for the transaction, the ratio of debt to EBITDA will be in the mid-3 times range. In addition, the ratings benefit from the company's entrenched position in its niche market, exclusive licenses with key sports leagues, diversification across retail channels and good liquidity, the agency said.

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