S&P snips Next Level Apparel

S&P said it downgraded its ratings for YS Garments LLC (Next Level Apparel) and its nonextended senior secured debt to CCC from B-. The 3 recovery rating is unchanged and indicates meaningful (50%-70%; rounded estimate: 65%) recovery in default.

On Tuesday, Next Level disclosed its lender group agreed to waive its financial covenant for the second quarter ended June 30, 2023 through Sept. 30, 2024. The amendment also granted a delayed filing of second-quarter financial statements. Equity holder Blue Point Capital Partners contributed $25 million of payment-in-kind (PIK) preferred equity to repay debt, which prevented a covenant breach, the agency said.

“We expect this to temporarily alleviate some near-term liquidity pressure. However, approximately $15.7 million of Next Level's nonextending term loan remains current and due on Aug. 9, 2024, and the company remains dependent upon near-term working capital improvement from lowering its inventory levels to cover this repayment,” S&P said in a press release.

The outlook is negative.

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