Morningstar DBRS Finalizes Provisional Credit Rating of BBB with a Stable Trend on Gildan Activewear Inc.'s Senior Unsecured Notes

DBRS Limited (Morningstar DBRS) finalized the provisional credit rating of BBB with a Stable trend on Gildan Activewear Inc.'s (Gildan or the Company, rated BBB with a Stable trend) Senior Unsecured Notes (the Notes), which closed on November 22, 2024.

The $700 million aggregate principal Notes issuance comprises two series: $500 million, 4.362% Series 1 Notes due November 22, 2029; and $200 million, 4.711% Series 2 Notes due November 22, 2031. Gildan intends to use the net proceeds from these issuances to repay existing indebtedness and for other general corporate purposes. The Notes will be senior unsecured obligations of the Company and will rank pari passu to all Gildan's existing and future senior unsecured and unsubordinated indebtedness.

Gildan's credit rating is supported by its strong free cash flow generation and conservative financial management; efficient, vertically integrated manufacturing platform; and limited sensitivity to changing fashion trends. The credit rating also considers the Company's exposure to commodity and input cost volatility, the intense competitive environment in which it operates, its customer and supplier concentration, and the geographic concentration of Gildan's manufacturing platform.

Morningstar DBRS could take a negative credit rating action should key credit metrics deteriorate to a level no longer considered appropriate for the current BBB credit rating category in aggregate (i.e., debt-to-EBITDA rising above 2.5 times, along with a corresponding decline in the Company's other key credit metrics) because of weaker-than-expected operating performance for a sustained period and/or more aggressive financial management. Furthermore, Morningstar DBRS notes that a weaker-than-expected operating performance for a sustained period resulting in a more permanent shift in the Company's business risk profile could also result in the requirement to maintain stronger key credit metrics to support the same credit rating. Conversely, Morningstar DBRS could take a positive credit rating action should Gildan's business risk profile meaningfully strengthen, combined with a commensurate improvement in key credit metrics on a normalized and sustainable basis.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)

A) Weighting of BRA Factors
In the analysis of Gildan, the relative weighting of the BRA factors was approximately equal.

B) Weighting of FRA Factors
In the analysis of Gildan, the relative weighting of the FRA factors was approximately equal.

C) Weighting of the BRA and the FRA
In the analysis of Gildan, the BRA carries greater weight than the FRA.

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

Morningstar DBRS applied the following principal methodology:

Global Methodology for Rating Companies in the Consumer Products Industry (August 14, 2024)
https://dbrs.morningstar.com/research/437890

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (April 15, 2024) https://dbrs.morningstar.com/research/431186 which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:

Morningstar DBRS Global Corporate Criteria (April 15, 2024)
https://dbrs.morningstar.com/research/431186

Morningstar DBRS Criteria: Approach to ESG Factors in Credit Ratings (August 13, 2024)
https://dbrs.morningstar.com/research/437781

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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