(Bloomberg) -- Gildan Activewear Inc. is looking at selling debt for the first time in Canada, and has set up meetings with fixed-income investors to discuss the potential sale, according to money managers briefed on the matter.
CEO Glenn Chamandy is among executives set to address debt investors in Toronto and Montreal over the next week. The roadshows start on Nov. 15. Bank of Montreal, Canadian Imperial Bank of Commerce, and Bank of Nova Scotia are hosting the presentations.
Banks have told investors that Gildan is considering selling debt, according to money managers briefed on the matter. On Tuesday, DBRS Morningstar said it assigned Gildan a BBB issuer rating with a stable trend, citing the company’s strong free cash flow generation and conservative financial management.
Gildan currently has $2.1 billion of debt, including revolving lines of credit, with about $1.5 billion of principal outstanding, according to materials distributed to money managers and seen by Bloomberg.
The potential sale could come at a time when corporate bond spreads in Canada are at their narrowest level against government bond benchmarks since late 2021, at a spread of nearly 1.05 percentage point, according to a Bloomberg index. The rally echoes similar gains in the US following the election of Donald Trump, which many believe will lead to corporate tax cuts and deregulation.
Meanwhile, Canadian investors are demanding more supply after a record year for issuance, with some transactions pricing at lower yields than existing debt, an unusual twist known as “negative concessions.”
Gildan, headquartered in Montreal and one of the world’s largest makers of T-shirts and other apparel, has been embroiled in a proxy fight with Browning West LP, an investment partnership. The battle cost Gildan $77 million in the first six months of 2024, the company said in August, and spurred the reinstatement of an ousted CEO.
The company is targeting to keep net debt in the range of 1.5 to 2.5 times an adjusted measure of income, namely earnings before interest, tax, depreciation and amortization, according to the materials.
Adding debt is one of the activist shareholders’ strategies for boosting Gildan’s stock price. CEO Chamandy said in March that he plans to essentially double the company’s earnings per share by 2028, and using debt to fund share buybacks was part of the strategy revamp.
--With assistance from Mathieu Dion and Esteban Duarte.
(Updates with detail about debt sale plans in last paragraph)
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