S&P upgrades Crocs, rates loan BBB-

S&P said it raised its ratings on Crocs Inc. to BB from BB- and its senior unsecured notes to BB- from B. The agency also revised the recovery rating on the unsecured notes to 5 from 6. S&P also assigned BBB- issue-level and 1 recovery ratings to Crocs' new $820 million term loan and withdrew the ratings on the company’s $1.18 billion term loan.

“The upgrade reflects Crocs' improved credit metrics, supported by its increasing EBITDA and debt reduction, as well as our expectation it will further improve its leverage to the low-1x area by the end of 2024,” S&P said in a statement. Crocs repaid more than $660 million in debt in 2023.

S&P said it expects to “modestly” increase its revenue in 2024. However, “Despite the top-line improvement, we forecast Crocs' S&P Global Ratings-adjusted EBITDA margin will contract by 160 basis points in 2024 as it continues to invest in marketing to support its brands. Therefore, we forecast the company's S&P Global Ratings-adjusted leverage will modestly improve to the low-1x area by the end of 2024.”

The outlook is stable.

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