Revealed! Pure Fishing extended its loan commitments to pay $153.4m for Svendsen Sport
Pure Fishing’s acquisition of Svendsen Sport earlier this year cost the world’s largest tackle supplier $153.4 million in cash with the potential for a performance-related extra payment of $22.5m.
The figure was revealed this month by S&P Global Ratings, the US-based credit ratings agency, in its latest rating update on the company. It also revealed that Pure Fishing expanded its loan responsibilities, upsizing its ABL revolver commitment to $250m, issuing an incremental $100m first-lien loan and a $25m second-lien loan to purchase the Danish group.
S&P added that the transaction demonstrates Pure Fishing’s risk for conducting acquisitions using incremental debt while the chance of persistent shocks to the real economy – growth and inflation – remained high.
It delivered a stable outlook for Pure Fishing, reflecting its belief that it can modestly reduce its very high leverage over the coming quarters. It added that EBITDA will be able to cover fixed charges, and liquidity will likely be adequate, mitigating the chance of a financial downgrade over the next 12 months.
However, it warned the situation could be unsustainable if there is an unexpected volatility in fishing equipment demand or inadvertent operating ‘missteps’ over the next two years.
S&P added: “We have assumed that demand could plateau in 2022 and moderate in 2023 as consumers return to other leisure activities that were not fully available during the pandemic. Demand and profitability could be hurt more than our base-case assumptions by macroeconomic risks and supply chain disruptions because the company’s sales are global.
“For example, an escalation of the Russia-Ukraine conflict could lead to energy supply disruptions or price shocks. Sustained inflationary pressures or drag on economic growth following potential policy missteps by central banks could also erode profits. COVID-19 containment measures in Asia, which supplies about 40% of Pure Fishing’s resale products, are also an additional macroeconomic risk and could cause supply shocks.
“The company had approximately $39 million in cash as of December 31st, 2021. Incorporating the ABL capacity remaining after the Svendsen acquisition, we estimate total liquidity at the end of March 2022 at about $105 million, which is adequate based on our forecast of cash uses over the next 12 to 24 months. The liquidity profile leads us to believe that a near-term default is unlikely, partly because the company’s next debt maturity is 2025.”