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26 Oct 2016
New York, October 26, 2016 -- Moody's Investors Service ("Moody's") today confirmed
Bass Pro Group, L.L.C.'s ratings ("Bass
Pro"), including its Ba3 Corporate Family Rating, Ba3-PD
Probability of Default Rating and the B1 rating on its Senior Secured
Term Loan due 2020. At the same time, Moody's assigned a
B1 rating to the company's proposed $3.87 billion
Senior Secured Credit Facilities, consisting of a 7-year
$3.37 billion Senior Secured Term Loan and a $500
million 1.5-year Senior Secured Asset Sale Term Loan.
The ratings outlook is positive.
"The acquisition combines two premier specialty brands in the outdoor
sporting goods industry," stated Moody's analyst Mike
Zuccaro. "While the proposed financing structure will result
in a pro forma leverage that remains around Bass Pro's current levels,
we expect significant de-leveraging to occur over time through
revenue and profit growth, margin expansion through synergy realization,
and debt reduction."
This concludes the review for downgrade initiated on October 4,
2016 following Bass Pro's announcement that it has entered into a definitive
agreement to acquire Cabela's Incorporated ("Cabela's," not rated
by Moody's) for $65.50 per share in cash, or an aggregate
transaction valued at around $5.5 billion. Immediately
prior to closing, Capital One, National Association ("Capital
One, NA"), a wholly-owned national banking subsidiary
of Capital One Financial Corporation, will acquire certain assets
and assume certain liabilities of Cabela's World's Foremost
Bank ("WFB"). Bass Pro will also commence a multi-year
partnership agreement whereby Capital One, NA will originate and
service the Cabela's CLUB, Cabela's cobranded credit
Bass Pro intends to use the proceeds from the proposed term loans to partially
fund the acquisition, refinance Bass Pro and Cabela's debt
and pay related fees and expenses. Additional funding will come
from $500 million of borrowing under a new $1.2 billion
Asset-Based revolver ("ABL"), a $75 million
ABL FILO tranche, proceeds from sale of WFB and around $2.4
billion of preferred equity. The company intends to repay the $500
million 1.5-year Senior Secured Asset Sale Term Loan using
proceeds from a sale/leaseback transaction that is expected to close near
the time of acquisition.
The following ratings are confirmed:
- Corporate Family Rating at Ba3
- Probability of Default Rating at Ba3-PD
- Senior Secured Term Loan due 2020 at B1 (LGD4); will be
withdrawn upon refinancing.
The following rating is assigned:
- $3.37 billion Senior Secured Term Loan due 2023
at B1 (LGD4)
- $500 million Senior Secured Asset Sale Term Loan due 2018
at B1 (LGD4)
The rating outlook is positive.
The confirmation of Bass Pro's Ba3 Corporate Family Rating reflects
the strategic benefits of the transaction, including strengthening
Bass Pro's market position in the highly fragmented outdoor sporting
goods industry, increasing its portfolio of well-known brand
names and combining Bass Pro's expertise in boating and fishing
with Cabela's hunting and shooting expertise. With pro forma
revenue of around $7.5 billion, the company will benefit
from larger combined scale that should drive significant cost savings
and potential revenue synergies over the next several years. Given
the sizeable non-debt funding sources contemplated in the transaction
in the form of preferred equity and WFB asset sales, Moody's
estimates that Bass Pro's pro forma leverage will remain near current
levels, or about 5.4x, for the twelve months ended
June 30, 2016, before considering synergies and potential
upside related to credit card portfolio profit sharing via the partnership
agreement with Capital One, NA. Moody's expects significant
de-leveraging to occur over the next three years through a combination
of revenue and profit growth, margin expansion and debt reduction
with free cash flow. Given the unique nature of this transaction
due to its size and transformative nature, Moody's expects
that once the transaction is complete, further sizeable distributions
or acquisitions will not occur over the next few years as the company
Bass Pro's Ba3 Corporate Family Rating reflects the company's well recognized
brand name in the outdoor recreational products market, the relatively
stable overall demand characteristics of this market, very broad
product offering, and demonstrated ability to profitably grow its
asset base. Bass Pro's revenue, EBITDA, and EBITDA
margins have grown steadily over the past few years a result of positive
same store sales, modest store expansion, and successful shift
in sales towards higher margin proprietary products. The company
also benefited from a significant cost reductions in its marine business.
The rating also considers Bass Pro's aggressive financial policy which
drives high debt leverage. The acquisition of Cabela's is
Bass Pro's largest to date, bringing significant integration
risks while occurring on the heels of the February 10, 2015 debt-financed
acquisition of Ranger boats and subsequent $300 million debt financed
dividend. The rating also considers the discretionary nature of
many products, particularly boats, which have highly cyclical
demand and accounts for nearly 20% of Bass Pro's standalone consolidated
The B1 rating assigned to the proposed Secured Term Loans are one notch
lower than Bass Pro's Corporate Family Rating, reflecting the high
portion of company assets that will be pledged to other lenders,
including the asset-based credit facility, floorplan financing
for its retail boat inventory, and various other mortgage and capital
lease obligations. This weakens the proposed term loans' recovery
prospects relative to this significant amount of secured debt.
The term loans will be secured by a first priority lien on substantially
all assets of the company except cash, accounts receivable and inventory,
on which they will have a second lien behind the ABL revolver.
The revolver and term loans are guaranteed by each direct or indirect
material domestic subsidiary as well as Bass Pro's direct parent
Bass Pro's liquidity is good, based on Moody's expectation
that balance sheet cash, operating cash flow and excess revolver
availability will be sufficient to cover cash flow needs over the next
12-18 months. Moody's also expects the company will
repay the $500 million 1.5-year Asset Sale Term Loan
well ahead of maturity, using proceeds from a proposed sale/leaseback
transaction. Additional liquidity will be provided by the proposed
$1.2 billion ABL that, despite $500 million
used to help fund the acquisition, is expected to maintain ample
excess availability over the next twelve months.
The positive rating outlook reflects the potential for significant profit
growth through synergy realization and loyalty program profit sharing,
along with Moody's expectation that the company will generate strong,
positive free cash flow to reduce debt and leverage. The outlook
also assumes that the company maintains good liquidity and successfully
executes on a proposed sale/leaseback transaction to extend its maturity
Ratings could be upgraded if Bass Pro achieves expected growth and synergy
realization, generates consistent positive free cash flow and debt
reduction, and demonstrates the ability and willingness to achieve
and maintain debt/EBITDA near 4.5 times at all times. An
upgrade would also require the maintenance of good liquidity.
Ratings could be downgraded if operating performance materially deteriorates,
challenges arise with regards to Cabela's integration, or
if financial policies became more aggressive, leading to debt/EBITDA
rising above 5.5 times on a sustained basis. Failure to
maintain good liquidity via the repayment or refinancing the proposed
$500 million 1.5-year Senior Secured Asset Sale Term
Loan well ahead of maturity could also lead to downward ratings pressure.
Headquartered in Springfield, Missouri, Bass Pro Group LLC
operates "Bass Pro Shops", a retailer of outdoor recreational products
throughout the US and Canada. The company also manufactures and
sells recreational boats and related marine products under the Tracker,
Mako, Tahoe, Nitro, Ranger Boats, Stratos" and
Triton brand names. The company also owns the Big Cedar Lodge in
Ridgedale, Missouri and Big Cypress Lodge in Memphis, Tennessee.
Headquartered in Sidney, Nebraska, Cabela's Incorporated is
a retailer of hunting, fishing, camping, shooting sports,
and related outdoor merchandise. The company also issues the Cabela's
CLUB® Visa credit card, which serves as its primary customer
loyalty rewards program.
The principal methodology used in these ratings was Retail Industry published
in October 2015. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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
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to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
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
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
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Janice Hofferber, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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