Crocs plans to issue $2B term loan to support HEYDUDE acquisition

Citi has committed to providing a $2 billion term loan B to Crocs Inc. to support the company's acquisition of casual footwear company HEYDUDE for $2.5 billion, which was announced today.

Under the terms of the agreement, total consideration is to be funded with $2.05 billion in cash and $450 million in shares of Crocs. Proceeds from the TLB, combined with a $50 million draw on the company's revolver, will be used to finance the cash portion of the acquisition. Pro forma net leverage is expected to be around 3x, based on estimated 2021 EBITDA. Closing of the acquisition is expected in the first quarter of 2022.

The financing commitment also includes a $500 million backstop revolving credit facility as the company seeks an amendment to the existing revolver to permit the acquisition and allow the additional debt.

For reference, existing debt at Crocs includes a $350 million issue of 4.125% senior unsecured notes due August 2031 that were issued in August and $350 million of 4.25% senior unsecured notes due March 2029 that were placed in March.

S&P Global Ratings today placed all ratings of Crocs, including current corporate and senor unsecured ratings of BB-, on negative CreditWatch. "We will seek to resolve the CreditWatch placement following our receipt of more information regarding HEYDUDE's financial performance and Crocs' financial outlook and policies," the agency said. "At that time, we will assess the acquisition's effect on our view of the company's overall operations, credit metrics, and financial policies, including its communicated target to prioritize debt repayment."

Moody's has not commented on the transaction, but existing corporate and unsecured ratings are Ba3 and B1, respectively, and the outlook is stable.

Nasdaq-listed Crocs makes casual footwear for women, men and children.