Prestige Healthcare Debt Refinancing
Prestige Consumer Healthcare Offers $400 Million Senior Notes to Redeem Prior Debt
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Prestige Consumer Healthcare (NYSE: PBH) announced plans on June 30 to offer $400 million in new senior notes due 2034 in a private sale, according to GlobeNewswire. The company will use the money to pay off its existing $400 million in 5.125% senior notes that come due in 2028, effectively pushing its debt deadline out by six years.
The move comes just weeks after Prestige closed a $1.045 billion deal to buy the Breathe Right brand and other over-the-counter health products. That acquisition more than doubled the company's debt load and triggered a credit rating warning from S&P Global.
Breathe Right Deal Forces Urgent Balance Sheet Cleanup
Prestige closed the Breathe Right acquisition on June 12, paying $1.045 billion for what it calls the "OTC Wellness Business," according to Markets Financial Content. To fund that deal, the company took on a new $1.14 billion secured term loan due 2033. That extra debt pushed Prestige's leverage ratio — the amount of debt compared to earnings — from 2.7x up to roughly 4.6x, per S&P Global estimates.
The Breathe Right business is expected to add $196.1 million in annual net sales, bringing the combined company's total to about $1.28 billion per year. But the price of that growth is steep. Prestige now expects to pay roughly $62.2 million more in interest costs every year because of the new debt.
S&P Cuts Unsecured Note Rating, Flags Recovery Risk
S&P Global Ratings moved quickly after the acquisition was announced. In May, it assigned a 'BBB-' rating to the new $1.14 billion term loan but cut the rating on Prestige's unsecured notes — including the ones being replaced — to 'BB-'. The reason: the big secured loan now sits ahead of unsecured bondholders if the company ever runs into trouble.
S&P analysts warned that unsecured noteholders could recover as little as 15 cents on the dollar in a default — a drop from what was previously called a "modest" recovery. The agency says Prestige needs to cut its leverage below 4x within 12 months to keep its current outlook stable. That is a tight window given the scale of the recent changes.
Private Sale Locks Out Retail Investors by Law
The new notes are being sold only to large institutional buyers — firms like pension funds and hedge funds — under a rule called Rule 144A. Regular retail investors cannot buy in. The offering is also available outside the United States to non-U.S. buyers under Regulation S, according to Yahoo Finance. Prestige was clear that its press release does not count as a public offer to sell the notes.
The sale comes with a key condition: the redemption of the old 2028 notes only happens if the new $400 million offering closes successfully. If market conditions turn bad and investors do not show up, Prestige stays stuck with the 2028 notes — creating what analysts call a "maturity wall" problem later in the decade.
Analysts Split on Whether the Debt Bet Pays Off
Some analysts see the offering as a smart move. Quiver Quantitative noted it shows Prestige can "access capital markets effectively" and that pushing debt out to 2034 gives the company more breathing room. The stock also trades at a price-to-earnings ratio of just 12.24, which some analysts say suggests the market may be undervaluing the company's ability to generate cash.
Others are more cautious. Prestige has used this playbook before — in 2016, it issued $350 million in notes to retire older, higher-cost debt. Back then, leverage was much lower. This time, the stakes are bigger. Whether the Breathe Right integration delivers on its promise will ultimately decide if this refinancing looks like smart planning or a risky gamble.
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