Moody's Downgrades Performance Sports Group's (PSG) PDR to 'D-PD'; Outlook Remains Negative

October 31, 2016 4:40 PM EDT

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Moody's Investors Service (Moody's) downgraded Performance Sports Group's (NYSE: PSG) Probability of Default Rating (PDR) to D-PD from Caa2-PD following the company's Chapter 11 filing on October 31, 2016. Performance Sports Group's other ratings were affirmed. The rating outlook remains negative.

Shortly following this rating action, Moody's will withdraw all ratings and the rating outlook of Performance Sports Group consistent with Moody's practice for companies operating under the purview of the bankruptcy courts wherein information flow typically becomes much more limited. (Refer to Moody's ratings withdrawal policy available on its website, www.moodys.com).

Rating downgraded:

Probability of Default Rating, Downgraded to D-PD from Caa2-PD;

Ratings affirmed:

Corporate Family Rating at Caa2;

Term Loan B rating at Caa3 (LGD4);

Speculative Grade Liquidity Rating at SGL-4

RATINGS RATIONALE

The downgrade of the PDR to D-PD reflects Performance Sports Group's filing under Chapter 11 in the U.S. Bankruptcy Court in Wilmington, Delaware and a similar court process in Canada on October 31, 2016. The bank waiver for the company to file its Audited Financial Statements for the year ended May 31, 2016 (which were originally due on August 15, 2016) expired on October 28, 2016.

As part of the bankruptcy filing, Fairfax Financial Holdings Ltd. and Sagard Capital Partners have entered into a "Purchase Agreement" with the company. Pursuant to the agreement, Fairfax and Sagard would acquire substantially all of the assets of the Company and its North American subsidiaries for $575 million, assume related operating liabilities and serve as a "stalking horse" bidder through the bankruptcy process. The Purchase Agreement sets the floor, or minimum acceptable bid during the bankruptcy proceedings. Fairfax and Sagard have also agreed to provide $386 million of debtor-in-possession financing. As of February, Performance Sports Group owed $331 under the term loan and $119 million on its ABL revolver.

The affirmation of the Caa2 Corporate Family Rating and Caa3 term loan rating reflects the expected strong recovery in the bankruptcy proceedings, while at the same time recognizing the increased uncertainty that any bankruptcy filing entails.

The principal methodology used in these ratings was Consumer Durables Industry published in September 2014. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.



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