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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. 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