Authentic Brands Group, now with the Boardriders deal officially closed, has seen its debt ratings upgraded by S&P and Moody’s over the past week.
S&P was the latest to raise Authentic’s issuer credit rating from B to B+, with a stable outlook on the company indicating anticipated steady performance of the business. The ratings and research agency cited in a note Monday Authentic’s low leverage, notably using less debt than expected for the Boardriders purchase, among the reasons for the updates.
Authentic closed on its purchase of the Boardriders group – which includes brands such as Quiksilver, Billabong, Roxy, DC Shoes, RVCA, Element, VonZipper, and Honolua – earlier this month.
S&P said Authentic, which is privately held and doesn’t disclose financial details, has so far seen strong performance and profitability in the first half of this year, particularly with Reebok’s performance exceeding expectations.
“The company’s recent acquisitions and partnerships on top of closing Boardriders further reinforce ABG’s quickly growing scale, as the pace and size of acquisitions have increased over the past two years,” S&P said in its note.
The agency went on to say Authentic has a proven track record in its licensing model for brands “previously mismanaged or under financial duress.”
Authentic now has annual revenue in excess of $1 billion, with 40% revenue growth seen in 2021 and again in 2022, according to S&P. The growth was driven by a ramp up in larger purchases during those years, with the $1.2 billion acquisition of Boardriders a continuation of that more recent trend.
S&P’s actions follow those taken last week by Moody’s Investors Service, which upgraded Authentic’s general creditworthiness rating from B2 to B1. Moody’s also moved its outlook for Authentic from positive to stable.
Moody’s cited Authentic’s scale across the past few years as the reason for the updates, with the firm’s brand portfolio now totaling more than 50.
“Operating performance has remained solid, including continued profitable growth, strong margins and free cash flow, despite a challenging consumer environment,” Moody’s noted of Authentic.
Moody’s, like S&P, pointed to Authentic’s business model, which is built on a steady stream of royalties with guaranteed minimums from its licensee roster. It’s a model that offers predictability in its operations, Moody’s said.
Kari Hamanaka can be reached at kari@shop-eat-surf-outdoor.com.
