BRP ANNOUNCES AMENDMENT AND EXTENSION OF ITS TERM FACILITY

Rhea-AI Summary

BRP Inc. successfully amended and extended a substantial portion of its term loan facility, extending $1,000 million of debt maturities from 2027 to 2031. The company issued a new $1,000 million Term Loan B-3, bearing interest at a rate of 275 basis points over Term SOFR with a Term SOFR floor of 0.0% and maturing in January 2031. The proceeds from this loan were used to repay a portion of the original Term Loan B-1 due May 2027. The amount outstanding under the Term Loan B-1 decreases from $1,466 million to $466 million, with all other terms unchanged. The other Term Loan B-2 due 2029 remains unchanged, and all loans outstanding under the Term Loan B facility remain exempt of financial covenants. This amendment is part of the company's strategy to preserve a strong balance sheet and increase flexibility for long-term growth.

Insights

Financial Analyst

BRP Inc.'s strategic refinancing move, which effectively extends the maturity of a significant portion of its debt, demonstrates a proactive approach to managing its capital structure. By extending the maturity from 2027 to 2031, the company mitigates the risk associated with refinancing in the short term, potentially in a less favorable interest rate environment. This extension provides BRP with increased operational flexibility, allowing it to allocate resources to areas that could stimulate growth rather than focusing on imminent debt repayments.

The introduction of the Term Loan B-3 at an interest rate of 275 basis points over Term SOFR, with no floor, is noteworthy. It reflects the company's creditworthiness and the lenders' confidence in its financial stability. However, it is crucial to monitor the interest rate landscape, as the absence of a SOFR floor means that BRP's interest obligations could increase if market rates rise. Stakeholders should consider the potential impact of fluctuating interest rates on the company's financials.

Market Research Analyst

BRP's amendment of its term loan facility may signal to the market a robust financial strategy that prioritizes long-term growth and stability. This action could be interpreted positively by investors and analysts, as it suggests management is taking preemptive measures to ensure financial health. It also reveals the company's ability to negotiate with lenders, which may be an indicator of its strong bargaining position and overall market reputation.

From a market perspective, it's important to assess how this refinancing aligns with industry norms. If BRP's competitors are facing tighter credit conditions or shorter debt maturities, BRP may gain a competitive advantage by having secured more favorable terms. This could potentially lead to increased investor confidence and a more favorable view of BRP's stock in the long-term.

Economist

BRP's decision to extend the maturity of its debt comes at a time when economic indicators suggest that interest rates may continue to fluctuate. By locking in a longer-term loan with a set interest margin, BRP is hedging against future economic uncertainty. This strategic financial maneuver can be seen as a safeguard against potential downturns or credit crunches that could affect the company's ability to refinance in the future.

It's essential to consider the broader economic implications of such financial decisions. If many companies follow suit and push out debt maturities, it might indicate a collective anticipation of a less favorable borrowing environment ahead. This trend could have significant implications for the overall credit market and capital expenditure plans across industries.

VALCOURT, QC, Jan. 22, 2024 /PRNewswire/ - BRP Inc. (TSX: DOO) (NASDAQ: DOOO) announced today that it successfully amended and extended a substantial portion of its term loan facility, effectively extending U.S. $1,000 million of debt maturities from 2027 to 2031.

"Proactively addressing our debt maturities is an important strategy behind our commitment to preserve a strong balance sheet, and further increases our flexibility to operate and invest for the long-term growth of the Company," said Sébastien Martel, Chief Financial Officer of BRP.

As part of this leverage-neutral amendment, the Company issued a new U.S. $1,000 million Term Loan B-3 from certain new and existing lenders, bearing interest at a rate of 275 basis points over Term SOFR with a Term SOFR floor of 0.0% and maturing in January 2031. The proceeds from this incremental Term Loan B-3 were used to repay a portion of the original Term Loan B-1 due May 2027. The amount outstanding under the Term Loan B-1 decreases from U.S. $1,466 million to U.S. $466 million, with all other terms unchanged including the applicable interest of 200 basis points over Term SOFR with a Term SOFR floor of 0.0%. The other Term Loan B-2 due 2029 remains unchanged and all loans outstanding under the Term Loan B facility remain exempt of financial covenants.

About BRP

BRP Inc. is a global leader in the world of powersports products, propulsion systems and boats built on over 80 years of ingenuity and intensive consumer focus. Through its portfolio of industry-leading and distinctive brands featuring Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons and Rotax marine propulsion systems as well as Rotax engines for karts and recreational aircraft, BRP unlocks exhilarating adventures and provides access to experiences across different playgrounds. The Company completes its lines of products with a dedicated parts, accessories and apparel portfolio to fully optimize the riding experience. Committed to growing responsibly, BRP is developing electric models for its existing product lines and exploring new low voltage and human assisted product categories. Headquartered in Quebec, Canada, BRP has annual sales of CA$10 billion from over 130 countries and a global workforce of close to 23,000 driven, resourceful people.

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Ski-Doo, Lynx, Sea-Doo, Can-Am, Rotax, Alumacraft, Manitou, Quintrex, and the BRP logo are trademarks of Bombardier Recreational Products Inc. or its affiliates. All other trademarks are the property of their respective owners.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this press release, including statements relating to the expected impact of this term facility amendment on the Company's ability to preserve a strong balance sheet and to increase its flexibility to operate and invest for its long-term growth and other statements that are not historical facts, constitute forward-looking statements within the meaning of applicable securities laws. The words "may", "will", "would", "should", "could", "expects", "forecasts", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "outlook", "predicts", "projects", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. Forward-looking statements, by their very nature, involve inherent risks and uncertainties and are based on a number of assumptions, both general and specific. The Company cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although believed reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, including, without limitation, the risk factors discussed in greater detail under the heading "Risk Factors" of its Annual Information Form dated March 22, 2023. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company has no intention and undertakes no obligation to update or revise any forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities regulations. In the event that the Company does update any forward-looking statements contained in this press release, no inference should be made that the Company will make additional updates with respect to that statement, related matters or any other forward-looking statement. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

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SOURCE BRP Inc.

FAQ

What is the purpose of the amendment and extension of BRP Inc.'s term loan facility?

The purpose is to extend $1,000 million of debt maturities from 2027 to 2031 and increase flexibility for the long-term growth of the company.

What is the interest rate and maturity of the new Term Loan B-3?

The new Term Loan B-3 bears interest at a rate of 275 basis points over Term SOFR with a Term SOFR floor of 0.0% and matures in January 2031.

How were the proceeds from the new loan used?

The proceeds were used to repay a portion of the original Term Loan B-1 due May 2027, decreasing the amount outstanding under the Term Loan B-1 from $1,466 million to $466 million.

What are the terms of the other existing loans under the Term Loan B facility?

The other Term Loan B-2 due 2029 remains unchanged, and all loans outstanding under the Term Loan B facility remain exempt of financial covenants.