DBRS Finalizes Golf Town Canada Inc. & Golfsmith International Holdings, Inc.’s $125 Million Senior Secured Second Lien Notes at B (low), Stable Trend

DBRS has today finalized the provisional rating of Golf Town Canada Inc. & Golfsmith International Holdings, Inc.’s Senior Secured Second Lien Notes (the Notes) at B (low), with a recovery rating of RR6 and a Stable trend, and confirmed its Issuer Rating at B (high), with a Stable trend.

DBRS assigned a provisional rating of B (low) to the Notes, with a recovery rating of RR6, on July 6, 2012 (see the related news release). Final terms of the issuance are substantially similar in nature but do contain the following major differences:

-- The total issuance of the Notes is $125 million versus the originally proposed $150 million.
-- The term of the Notes was extended by one year to six years, maturing in 2018, and the no-call period was correspondingly extended one year to three years.
-- The maximum borrowing capacity under the asset-backed loan (ABL) was reduced by $10 million to $150 million. The ABL retains the first lien and a priority claim on substantially all of the assets of the joint issuers, Golf Town Canada Inc. and Golfsmith International Holdings, Inc. and all guarantors.

The Notes continue to be secured by a second lien, ranking behind only the ABL, on substantially all of the assets of the joint issuers and all present and future subsidiaries and guarantors except for future subsidiaries that do not incur indebtedness.

DBRS recognizes such changes to the terms, which now form the basis for the final rating, represent a lower debt level and modest improvement in credit metrics and have therefore strengthened the ratings somewhat within the current rating category.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Merchandising Industry, which can be found on our website under Methodologies.