S&P rates Vestis BB, loan BB+

S&P said it assigned Vestis Corp. a BB issuer rating and BB+ issue-level and 2 recover ratings to its seven-year $800 million term loan. The outlook is stable.

“Our rating reflects Vestis' favorable position in uniform rentals and workplace supplies, with significant white space that limits competition. The industry is highly fragmented with a few large operators (Cintas, Vestis, and UniFirst) serving only about a quarter of the addressable market. This creates an attractive opportunity for growth through nonprogrammer (potential customers not already subscribed to a uniform rental program) conversions and consolidation of small-scale providers,” the agency said in a press release.

The agency added, “We expect Vestis will focus on reducing leverage over the next two to three years. The company funded its nearly $1.5 billion spin-off dividend to Aramark shareholders with new term debt in September 2023, resulting in S&P Global Ratings-adjusted leverage of about 4x (about consistent with management's calculation). With net leverage currently well above its stated target of 1.5x-2.5x, we expect a focus on strengthening the balance sheet. Our forecast reflects leverage remaining elevated at about 4x this year as incremental public company costs and spin-off related expenses hinder EBITDA expansion.”

Vestis plans to use the loan to refinance its two-year term loan.

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