Moody’s Investors Service has assigned a B1 rating to the proposed term loan from Great Outdoors Group, LLC, the corporate name of Bass Pro Group. At the same time, Moody’s confirmed the Ba3 Corporate Family Rating (CFR) and the Ba3-PD Default Probability Rating (PDR). The outlook remains stable.
S&P said the proceeds from the GAO proposed term loan of $ 4.5 billion.
The proposed term loan has the following ratings for Great Outdoors Group, LLC:
- Company family rating confirmed with Ba3;
- Probability of default rating confirms Ba3-PD;
- Senior Secured Term Loan B due 2028, assigned to B1 (LGD4);
- Outlook remains stable; and
- The rating for the existing term loan due in 2024 will be withdrawn at the end.
Moody’s said, “GAO’s Ba3 CFR is backed by its well-known brand names and leadership position in the retail outdoor recreational products sector. The company’s margins benefit from its sizeable and stable credit card income stream and significant proprietary brand penetration. In addition, GAO’s destination experience retailer business model sets itself apart from mass market and big box competitors who do not offer the level of in-store customer service that forms the basis of its loyal customer base. In addition, the diverse range of products and the affordable price points alleviate the pressure on earnings in times of economic downturns. The acquisition of Sportsman’s Warehouse will further expand GAO’s reach and is a good strategic addition as it serves a very similar group of customers and expands the company’s presence in complementary geographic regions. Given the successful integration of Cabela’s since the acquisition in 2016, Moody’s expects the integration risk of Sportsman’s Warehouse to be modest and that synergies will be realized over time through cost reductions and the introduction of GAO’s own brands.
“GAO’s credit profile is constrained by its high level of leverage. Moody’s estimates pro forma debt / EBITDA at 4.4x and EBIT / interest expense at 2.6x, based on preliminary results from GAO for 4th 2020 as a result of the pandemic-induced lifestyle changes and increased participation in outdoor activities . However, operational performance could weaken over the next 12 to 24 months once health and safety concerns subside, which would push consumers back to other spending categories like travel and entertainment. The leverage of Moody’s projects increases to 4.9 times and the EBIT / interest expense decreases to 2.2 times. The rating also reflects the company’s aggressive financial strategies, including using cash flow and additional debt for member distributions, repaying preferred and common stocks issued by Bass Pro’s parent company. In addition, as a retailer, Bass Pro must continually invest in its brand and infrastructure, as well as in social and environmental factors, including responsible sourcing, product and delivery sustainability, privacy and data protection. The company’s ongoing offering of firearms and ammunition at a time when several other large retailers have reduced their offerings in this category is also a social consideration.
“Moody’s expects the company to have good liquidity in the next 12 to 18 months. Moody’s expects a slightly positive free cash flow for 2021. Liquidity is also provided by access to an undrawn asset-based turret of $ 1.275 billion.
“The stable outlook reflects Moody’s expectation that despite a probable normalization of demand in the outdoor, firearms and sports categories in 2021 after the increase in 2020, the credit metrics will match the Ba3 rating and the company will exceed in the next few years will have good liquidity. “12 to 18 months.”
Photo courtesy of Bass Pro