S&P affirms Varsity Brands

S&P said it affirmed its B corporate credit rating on Varsity Brands Holding Co. Inc. and removed the rating from CreditWatch, where it was placed with negative implications on June 27.

The outlook is negative.

At the same time, the agency affirmed the B issue-level rating on the company's upsized $1.395 billion first-lien term loan due 2024 and removed the rating from CreditWatch.

The 3 recovery rating remains, indicating an expectation for meaningful (50%-70%; rounded estimate: 55%) recovery in the event of a payment default.

Bain Capital is acquiring Varsity Brands and Hercules Achievement Inc. from their current sponsor Charlesbank Partners LLC for $2.9 billion.

The company is transporting its existing rated first-lien term loan and unrated second-lien notes to the new proposed capital structure, which will include an incremental $275 million first-lien term loan and a $120 million second-lien note add-on.

“We estimate that this transaction will cause the company's pro forma debt-to-EBITDA to weaken to around 8.5x from 7.0x currently,” S&P said in a news release.

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