Fitch rates Michael Kors loans BBB-

Fitch Ratings said it assigned a BBB- rating to Michael Kors Holdings Ltd.'s new $1.6 billion of senior unsecured term loans, which will be split evenly into two- and five-year tranches.

The proceeds from the term loans, along with cash on hand, revolver borrowings and equity to the Versace family, will be used to the fund the $2.12 billion proposed acquisition of Gianni Versace SpA.

Pro forma for the acquisition, leverage is expected to be 3.6x compared with 2.4x at the end of 2017, Fitch said.

Given the company's publicly stated debt paydown plans as well as its track record with the recent Jimmy Choo acquisition, Fitch said it expects Michael Kors to direct free cash flow toward debt reduction, which, in conjunction with EBITDA growth, should result in leverage declining to under 3x within two years post acquisition close.

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