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Investing.com -- S&P Global Ratings has lowered its rating on Hanesbrands (NYSE:HBI) Inc.'s senior secured credit facilities to 'BB-' from 'BB' on February 21, 2025. This revision is due to the increased amount of secured debt in the company's capital structure. Hanesbrands has expanded its proposed term loan B to $1.1 billion, up from $600 million.
This credit rating adjustment also reflects a change in the secured debt recovery rating, which has been revised to '2' from '1'. This signifies that, in the event of a default, the anticipated recovery rate is substantial, between 70% and 90%. The rounded estimate is now at 75%, down from the previous estimate of 90%.
In addition to the upsized term loan B, Hanesbrands plans to borrow under a new five-year $750 million revolver and five-year $400 million term loan A. These new borrowings will be used to refinance the company's existing revolver, term loan A, term loan B, and $900 million 4.875% senior unsecured notes due May 2026.
The ratings and recovery rating for the company’s existing $600 million senior unsecured notes due 2031 remain unchanged at ‘B+’ and ‘4’, respectively. A '4' recovery rating indicates an average recovery expectation of 30%-50% in a default scenario, with a rounded estimate of 35%.
S&P Global Ratings expects Hanesbrands' credit metrics to strengthen due to ongoing operational improvements and reduced debt obligations. The ratings agency reported that the leverage was 5.7x in fiscal 2024 and is anticipated to fall below 5x in the coming year. Hanesbrands is also expected to continue streamlining its merchandise offering and plans to exit its Champion Japan business by the end of 2025.
Hanesbrands' liquidity is still deemed adequate by S&P Global Ratings, and the completion of this refinancing means the company has no near-term maturing debt. The company is also undergoing a leadership transition, with the current chief executive officer set to step down from his role at the end of 2025.
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