Fitch places Capri on negative watch

Fitch Ratings said it placed all of Capri Holdings Ltd.'s, Michael Kors (USA), Inc.'s and Gianni Versace Srl's ratings, including the long-term issuer default rating of BBB-, on rating watch negative following a definitive agreement to be acquired by Tapestry Inc. for about $8.5 billion.

The deal is expected to close during calendar 2024, following shareholder and regulatory approval.

“The RWN reflects the potential that EBITDAR leverage for the combined company could be in the low-4x range beyond 12 to 24 months post acquisition close versus Fitch's expectations for Capri's stand-alone credit profile that EBITDAR leverage will be sustained in the low-3x range over the medium term. Given the expected close timeline, the RWN may take over six months to resolve,” the agency said in a press release.

Fitch, however, noted the combined company “could benefit from its increased scale and greater brand, product, and geographic diversification.”

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