Phillips-Van Heusen Corp. might have inked a deal to acquire Tommy Hilfiger from Apax Partners, but it still has to secure financing for the $3 billion acquisition and has been out drumming up interest.
On Tuesday, Moody’s Investors Service gave the firm’s proposed $2.45 billion in bank loans to close the transaction a rating of “Ba2,” two notches into speculative or “junk” territory. PVH’s pitch is relatively straightforward. PVH is planning to use its free cash flow — which should top $200 million the first year after the deal and $300 million by year three — to cover payments on the $2.45 billion in debt. Cash flow excites debt holders because it is a sign of financial strength and the vitality of the business as well as its ability to make good on its obligations.
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