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Tapestry (TPR; Baa2, BBB+; double Neg) {TAP US Equity}

CONSUMER CYCLICALS
  • Re. Tapestry 27's, the parent of Coach is yet to close on the Capri acquisition (Versace, Michel Kors, Jimmy Choo parent) - it said its expected to close this year though {CPRI US Equity} equities have moved away from pricing the $57 buyout.
  • Net we see pricing out of the closure as credit negative - docs language around timing seems flexible but if deal doesn't close it will result in a 101% redemption + accrued interest. Clean price on the bond is currently €103.5.
  • Downgrades are expected to Baa3 on transaction close. Bar early redemption, it does screen 'some value' here trading at top-end of IG names and in line with HY retailers like Dufry. Likely high beta to any weakness in operating performance in interim - equities have been on the slide since PVH guidance (down -13%), weak performance in Q3 results from Capri (-6.6%yoy in constant currency sales vs. expectations for -3.8%) not helping.
  • The 27's were issued in Late Nov at +245 as part financing for $8.5b Capri acquisition - its come in a impressive 110bps since.
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