New York, July 06, 2020 -- Moody's Investors Service, ("Moody's") today assigned a Baa3 rating
to PVH Corp.'s ("PVH" or "the Company") proposed senior unsecured
notes offering, and affirmed the Baa3 senior unsecured ratings on
PVH and its subsidiaries. PVH's Prime-3 commercial
paper rating was also affirmed. The outlooks remain stable.
The net proceeds from the proposed offering are expected to be used for
general corporate purposes, including, among other things,
the repayment of outstanding indebtedness.
"The transaction will boost PVH's already excellent liquidity,
allowing it to navigate the severe near term challenges caused by the
global coronavirus pandemic," stated Moody's apparel
analyst, Mike Zuccaro. "The Company continues to maintain
a solid position in the global apparel market, with ownership of
two multibillion dollar lifestyle fashion brands with solid execution
and long term growth potential. With a slow recovery set to begin
in late 2020 and a sizeable amount of pre-payable debt, we
expect credit metrics to quickly improve closer to 2019 levels towards
the end of 2021."
Assignments:
..Issuer: PVH Corp.
....Senior Unsecured Regular Bond/Debenture,
Assigned Baa3
Affirmations:
..Issuer: PVH Asia Limited
....Senior Unsecured Bank Credit Facility,
Affirmed Baa3
..Issuer: PVH B.V.
....Senior Unsecured Bank Credit Facility,
Affirmed Baa3
..Issuer: PVH Corp.
....Senior Unsecured Bank Credit Facility,
Affirmed Baa3
....Senior Unsecured Commercial Paper,
Affirmed P-3
....Senior Unsecured Regular Bond/Debenture,
Affirmed Baa3
Outlook Actions:
..Issuer: PVH Asia Limited
....Outlook, Remains Stable
..Issuer: PVH B.V.
....Outlook, Remains Stable
..Issuer: PVH Corp.
....Outlook, Remains Stable
RATINGS RATIONALE
The rapid spread of the coronavirus outbreak, deteriorating global
economic outlook, and high asset price volatility have created an
unprecedented credit shock across a range of sectors and regions.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Today's action reflects the impact on PVH Corp. of the deterioration
in credit quality it has triggered, given its exposure to temporary
store closures and discretionary consumer spending, which has left
it vulnerable to shifts in market demand and sentiment in these unprecedented
operating conditions.
PVH's Baa3 senior unsecured rating reflects its strong market position
and diversity, including ownership of two multibillion dollar lifestyle
fashion brands with global presence and broad lifestyle appeal -
Tommy Hilfiger and Calvin Klein. The rating also reflects the Company's
ability to maintain consistent performance as evidenced by maintaining
strong operating margins in a challenging apparel environment over the
past several years. Having reduced balance sheet debt significantly
over the past five years, PVH's financial leverage was moderate,
with debt/EBITDA of around 2.8 times as of the fiscal year ended
February 2020. However, Moody's expects operating performance
and credit metrics to significantly deteriorate in 2020 as a result of
the unprecedented disruptions caused by the global coronavirus pandemic
(COVID-19), with improvement towards 2019 levels (debt/EBITDA
improving near 3.0x) in 2021 due to a gradual earnings recovery
and permanent debt reduction. The rating also reflects governance
considerations including suspension of share repurchases and dividends,
with a longer term track record of balancing share repurchases and debt
reduction, as well as meaningful debt-financed acquisitions
from time-to-time.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable outlook reflects Moody's expectation that operating performance
and metrics will significantly improve in 2021, that its financial
strategy will remain focused on reducing debt and leverage, and
that liquidity will remain excellent.
Ratings could be downgraded if it appears that the company will be unable
to improve 2021 EBITDA to a level within 20% below 2019,
if liquidity deteriorates or financial strategy becomes more aggressive,
including share repurchases before returning to more normalized operating
performance and reducing debt and leverage. Quantitatively,
ratings could be downgraded if debt/EBITDA was sustained above 3.0
times and EBITA/Interest below 4.5 times.
Ratings could be upgraded if the Company maintains stable revenue and
profit growth over time. Quantitative metrics include debt/EBITDA
sustained below 2.5 times and interest coverage above 5.5
times.
Headquartered in New York, NY, PVH is one of the world's largest
apparel companies, with owned brands such as Calvin Klein,
Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner's,
Olga, and True&Co. PVH markets a variety of goods under
these and other nationally and internationally known owned and licensed
brands. Revenue for the twelve months ended May 4, 2020 approached
$9 billion.
The principal methodology used in these ratings was Apparel Methodology
published in October 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1182038.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Michael M. Zuccaro
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Margaret Taylor
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
