Authentic’s Proposed Loan for Boardriders Deal Rated by Moody’s
The research note comes after Authentic Brands remerged earlier this month as a potential buyer of the action sports behemoth, sources told SES. Bluestar Alliance – owner of Hurley, Bebe, and Brookstone, among other brands – had previously been conducting due diligence on the business before its exclusivity period expired.
The ratings service issued a B1 rating, which falls just below investment grade, for Authentic’s proposed senior secured first lien credit facilities. The loans include a $240 million revolver, $1.5 billion term loan, and a $600 million delayed draw term loan. All come due in 2028.
Moody’s, which did not respond to a request for comment Thursday, said in its research note that proceeds of the $600 million loan “will be used to finance a potential acquisition of Boardriders Inc.” Proceeds of the term loan are expected to be used to refinance debt that comes due in September 2024.
A spokesperson for Authentic declined to comment on the Moody’s research.
Moody’s said the ratings are based on the risks involved with the debt stemming from Authentic’s “acquisitive nature,” pointing to the company’s purchases last year of Reebok and the David Beckham brand that led to a higher debt load. However, that was partially offset by licensing royalties and increased earnings.
Brien Rowe, founder and managing director of advisory firm RT Advisors and an M&A specialist, believes the Moody’s disclosure indicates Authentic wants to move forward on a deal.
“I think it’s certainly an affirmation that they’re serious and they’re moving forward,” Rowe said. “A deal doesn’t close until it’s closed, but I don’t think it’s a casual reference. There’s some serious intent there and those that are watching this know that ABG has been looking and talking in and around the asset.”
Rowe has advised in transactions involving RVCA, Huf, Globe International, Fox Head, and several others in the action sports, streetwear, outdoor, and fashion spaces.
“I’m not surprised to see them in the mix, and I think they could be good acquirers,” Rowe said. “They’ve got Volcom, Vision Street Wear, Spyder. They’ve done some great things with a number of relevant assets.”
Authentic’s portfolio includes more than 40 brands.
The privately-held Authentic doesn’t typically report its financials. However, Moody’s said the company had revenue in excess of $950 million for the year ended in September.
“The company has exhibited steady operating performance over the past few years, including demonstrated resilience through the coronavirus pandemic,” Moody’s noted.
Moody’s went on to say 2020 revenue and earnings increased from 2019, driven by royalties, online shopping, and what it called effective management of expenses and acquisitions.
Editor’s Update: Since this article’s publication, Authentic signed a definitive agreement to acquire Boardriders, which you can read about here.