U.S. markets closed
  • S&P 500

    4,577.11
    -85.74 (-1.84%)
     
  • Dow 30

    35,368.47
    -543.34 (-1.51%)
     
  • Nasdaq

    14,506.90
    -386.86 (-2.60%)
     
  • Russell 2000

    2,096.23
    -66.23 (-3.06%)
     
  • Crude Oil

    86.87
    +1.44 (+1.69%)
     
  • Gold

    1,813.40
    +1.00 (+0.06%)
     
  • Silver

    23.49
    -0.00 (-0.01%)
     
  • EUR/USD

    1.1329
    -0.0001 (-0.01%)
     
  • 10-Yr Bond

    1.8650
    +0.0930 (+5.25%)
     
  • GBP/USD

    1.3592
    -0.0006 (-0.04%)
     
  • USD/JPY

    114.6980
    +0.1130 (+0.10%)
     
  • BTC-USD

    42,246.98
    -154.74 (-0.36%)
     
  • CMC Crypto 200

    1,006.33
    -3.06 (-0.30%)
     
  • FTSE 100

    7,563.55
    -47.68 (-0.63%)
     
  • Nikkei 225

    27,766.30
    -490.95 (-1.74%)
     

Champ Acquisition Corporation -- Moody's affirms Champ Acquisition's (Jostens) CFR at B2; changes outlook to stable from negative

·16 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Rating Action: Moody's affirms Champ Acquisition's (Jostens) CFR at B2; changes outlook to stable from negativeGlobal Credit Research - 29 Mar 2021New York, March 29, 2021 -- Moody's Investors Service, ("Moody's") affirmed Champ Acquisition Corporation's (Champ) Corporate Family Rating (CFR) at B2 and Probability of Default Rating at B2-PD. Champ is the parent company of Jostens, Inc. At the same time, Moody's affirmed the B1 rating for the company's senior secured first lien credit facilities, consisting of a $150 million first lien revolver due 2023 and a $775 million principal amount first lien term loan due 2025, and also affirmed the Caa1 rating for the company's $150 million senior secured second lien term loan due 2026. The rating outlook was changed to stable from negative.Today's ratings affirmations and change to a stable outlook reflects the company's better than anticipated free cash flows during a challenging fiscal 2020, and Moody's expectations for topline and earnings recovery in fiscal 2021 that will reduce leverage. Champ's revenue declined -10% in fiscal 2020 versus the prior year, with flat yearbook sales more than offset by sales declines in its scholastic and college/pro segments. However, the company's free cash flows remained stable supported by strong cost controls and lower capital expenditures. Moody's expects revenue and earnings growth will benefit from continued stable yearbook sales, and a gradual recovery in scholastic and college/pro related products over the next 12-18 months, supported by a recovering US economy and schools reopening throughout 2021. In addition, Moody's anticipates the $44 million of business transformation and other costs incurred in 2020 related to the coronavirus will moderate in 2021. As a result, Moody's projects debt/EBITDA leverage will decline to around 4.3x and for free cash flows in the range of $60 million over the next 12-18 months.The following ratings/assessments are affected by today's action:Ratings Affirmed:..Issuer: Champ Acquisition Corporation.... Corporate Family Rating, Affirmed B2.... Probability of Default Rating, Affirmed B2-PD....GTD Senior Secured 1st Lien Term Loan, Affirmed B1 (LGD3)....GTD Senior Secured 1st Lien Revolving Credit Facility, Affirmed B1 (LGD3)....GTD Senior Secured 2nd Lien Term Loan, Affirmed Caa1 (LGD5)Outlook Actions:..Issuer: Champ Acquisition Corporation....Outlook, Changed To Stable From NegativeRATINGS RATIONALEChamp's B2 CFR credit profile broadly reflects the company's high financial leverage with debt/EBITDA at 6.2x as of fiscal year end December 31, 2020. The company has a narrow product focus in school related affinity products including yearbooks, school rings, graduation gowns, and related products. Products such as class rings and yearbooks are steadily declining and there is risk to certain products from online tools that can be used to share photographs and other information. Schools across the U.S. remain partially closed to in-person instruction due to the coronavirus outbreak and efforts to avoid large gatherings may result in graduation ceremony cancelations or restrictions. A prolonged high unemployment rate is also likely to weaken discretionary consumer spending. Competitive and market risks are partially mitigated by the breadth and quality of Champ's product and service capabilities, the company's ability to personalize products, strong sales support and customer service, and the long-standing relationships of the company's large network of independent sales representatives with individual schools and colleges. The company's adequate liquidity reflects Moody's expectations for free cash flow in the $60 million range over the next 12 months, and access to an undrawn $150 million revolver due 2023, which provides financial flexibility to fund near term working capital seasonality and the annual term loan amortization of approximately $39 million. However, because Champ's modest cash of $3.2 million at the end of fiscal 2020, the company will need to increase free cash flow from the $29 million produced in 2020 to fund required term loan amortization without having to draw on the revolver aside from normal seasonal needs. This could prove challenging if the operating demand for school affinity products remains soft, capital expenditures increase more than anticipated or restructuring and other coronavirus related costs do not fall as much as projected.Governance factors primarily relate to the company's aggressive financial policies under private equity ownership, including its high financial leverage and the inherent risks of activities such as shareholder distributions.The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of Champ from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe stable outlook reflects Moody's expectations that Champ's revenue and earnings will gradually recover in fiscal 2021 with the company generating annual free cash flow in the $60 million range that will cover the high annual term loan amortization of approximately $39 million, and resulting in debt/EBITDA declining to around 4.3x by the end of 2021.Ratings could be upgraded if the company increases its revenue scale, demonstrates consistent organic revenue growth and operating margin expansion, while debt/EBITDA is sustained below 4.0x. A ratings upgrade would also require the company to maintain at least good liquidity, and Moody's to expect financial policies that support credit metrics at the above levels.Ratings could be downgraded if the company's revenue and earnings do not recover as expected, debt/EBITDA is sustained above 5.5x, or if liquidity weakens. Failure to generate free cash flow sufficient to meet required term loan amortization or the revolver is drawn more than expected beyond normal seasonal needs could result in a downgrade. Ratings could also be downgraded if financial policies become more aggressive, including undertaking a large debt-financed acquisition or dividend distribution that materially increases financial leverage before earnings have recovered.The principal methodology used in these ratings was Consumer Durables Industry published in April 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060509. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Headquartered in Minneapolis, MN, Champ Acquisition Corporation owns Jostens, which is a manufacturer and seller of yearbooks, publications, jewelry, and other school-related affinity products that serve the K--12 educational, college, and professional sports segments. The company was acquired by private equity firm Platinum Equity in December 2018 from Newell Brands for approximately $1.1 billion, and revenue in fiscal year end December 31, 2020 was $686.5 million.REGULATORY DISCLOSURESFor 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 ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. Oliver Alcantara 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 John E. Puchalla, CFA 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 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​