Till recently, Calceus Acquisition (aka Cole Haan) was that rarity: a retailer performing well and closing in on an IPO. Now, with Covid-19, the IPO is off and the ratings groups are worrying about declining financial performance as stores are closed and debt to EBITDA shoots up. Moody’s projects EBITDA to drop as much as (40%-60%) in “FYE May 2020 from the LTM period ended November 30, 2019”. EBITA coverage of interest due could drop to 1.1x. Both Moody’s and S&P have changed the company’s outlook to negative. Still, Moody’s has affirmed the company’s B1 “corporate family rating”. Nonetheless, this is still a moving target given the economic uncertainty.
There is only one BDC with exposure to Cole Haan: Bain Capital Specialty Finance (BCSF), which holds $7mn of the company’s 2025 Term Loan and which was valued at par at year end 2019 before this brouhaha started. Now the debt is trading – according to Advantage Data – at 88 cents on the dollar. Given that and the downgrades and the obvious stresses on the company, we’ve added Calceus Acquisition to the Under Performers list with an initial rating of CCR 3. That means we’re still more hopeful than not no ultimate loss will occur. This may change in the days ahead. A lot can happen in a few weeks when little or no income is coming in. Ask…everyone.