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05 May 2004
MOODY'S ASSIGNS Ba3 TO MAIDENFORM'S PROPOSED FIRST LIEN CREDIT FACILITY AND B2 TO PROPOSED SECOND LIEN FACILITY.
Approximately $ 180 million of debt affected
New York, May 05, 2004 -- Moody's Investors Service assigned a rating of Ba3 to Maidenform,
Inc.'s proposed $130 million guaranteed senior secured
credit facility due 2010 and a B2 to the proposed $50 million guaranteed
senior secured second lien term loan due 2011. The company was
assigned a senior implied rating of Ba3 and an unsecured issuer rating
of B3. The outlook on the ratings is stable. This is the
first time Moody's has rated the debt of Maidenform.
The proceeds from the contemplated debt financings, along with the
investment capital detailed below, will be used to finance the acquisition
of Maidenform, Inc. for approximately $223 million
(subject to working capital adjustments). Specifically, the
proceeds will be used to refinance existing debt of $54 million,
purchase common shares for $161 million (including rollover amounts)
and pay fees and expenses of $8 million.
The rating reflects the high leverage of 4.5 times pro forma total
debt to last twelve months ended March 27, 2004 EBITDA; negative
tangible equity and moderate pro forma fixed charge coverage.
The rating is supported by the positive contributions of new management
which has generated a steady improvement in sales, operating margins
and cash flow; created a diversified brand and distribution channel
strategy; shifted from 100% domestic manufacturing to a high
percentage of foreign-sourced product; and installed fully
integrated financial and inventory systems and controls which, along
with a significant SKU rationalization, improved inventory management
and reduced working capital needs.
The Ba3 rating on the $130 million first priority lien guaranteed
debt reflects Moody's belief that the strong cash flow will lead
to timely deleveraging. The rating also incorporates the benefits
and limitations of the collateral package in a distressed scenario as
well as the fact that this tranche of debt represents the largest portion
of the capital structure.
The B2 rating on the $50 million second lien term facility due
2011 reflects the relative subordination of this debt class to the large
amount of first lien debt and the resulting weaker asset coverage of this
debt class in a distressed scenario.
The first lien credit facility consists of a $30 million revolving
credit facility and a $100 million amortizing term facility both
due in 2010. The facilities will be guaranteed by any material
domestic subsidiaries of the borrower as well as by its parent (described
below.) The security will be evidenced by a first priority lien
on substantially all domestic assets and 66% of the capital stock
of foreign subsidiaries. Availability under the revolver is based
on a borrowing-based formula of 85% of eligible accounts
receivable (including both US and Canadian dollar receivables) and 50%
of eligible domestic inventory. The terms of the revolver also
have a clean-up provision wherein the maximum usage may only be
$15 million for one 30 day period during a given year.
The $50 million second priority lien term loan due 2011 enjoys
the same guarantee and security package as the first lien facility,
but on a junior basis.
Both facilities benefit from mandatory prepayment provisions including
an initial cash flow sweep of 75%, as well as proceeds from
asset sales, or debt or equity issuance. Mandatory repayments
will first be applied to reduce the remaining scheduled installments on
a pro rata basis, then to reduce any swing loans, and then
to reduce any outstandings under the revolver.
MF Acquisition Corporation ("Holdings"), and its wholly
owned subsidiary, MF Merger Corporation, are special purpose
companies created to acquire and hold 100% of the capital stock
of the borrower, Maidenform, Inc. MF Acquisition Corporation
will be capitalized with a contribution of $55 million from Ares
Corporate Opportunities Fund, L.P. and other minority
investors and $18 million of rollover investment from both the
current equity sponsor, Oaktree Capital Management, and by
existing management. Half of each party's contribution in
Holdings will take the form of 15% perpetual preferred stock (which
will accumulate unless payment is permitted under the credit facilities)
and the remaining fifty percent will take the form of common stock.
Holdings will downstream the capital to Maidenform in the form of common
Maidenform, Inc., based in Bayonne, New Jersey
is a designer and marketer of intimate apparel with revenues of $293
million for fiscal year 2003. Its primary brands are Maidenform,
Flexees and Lilyette. The company distributes its brands primarily
through department stores, national chains and the mass channel.
MF Acquisition Corporation, a Delaware corporation, is a special
purpose company, which was created to acquire and hold 100%
of the capital stock of Maidenform.
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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