As international investment firm KKR aims to use billions of dollars of new junk-rated loan on the company to get out existing owners, Bain Capital-owned Varsity Brands is becoming its second private equity ruler in a century.
Varsity Brands—which owns cheerleading giant Varsity Spirit and athletic outfitter BSN Sports—will sell$ 2.375 billion in new first-tier debt and take$ 100 million from a new$ 400 million credit line to help KKR buy out other shareholders, according to ratings notes published this week by Moody’s and S&amp, P Global.
KKR and Bain reached an agreement to purchase Varsity earlier this month, according to a source with knowledge of the situation. Varsity, KKR, and Bain’s representatives either declined to comment or did not respond to Sportico’s email questions.

Reuters was the first to report on the impending deal, which it priced at$ 4.75 billion, according to private sources. According to KKR’s papers with the Securities and Exchange Commission, two of its money had previously provided money to Varsity worth$ 36 million as of April.
While rating agencies can obtain their opinions from corporate finances, the majority of the numbers are n’t made public. Both Moody’s and S&amp, P suggest in their records that Varsity has been losing cash. Varsity is projected to make about$ 10 million in free cash flow in 2024, according to Moorey’s, up from its negative cash flow. S&amp, P says it believes the company may increase to “at least” income stream break even. The amount of money a company has left after paying its operating and capital costs is called free cash flowing.
Varsity has endured a stormy some years, having been forced to protect itself in many lawsuits over competitive, sexual abuse, trademark and insurance-related claims. The organization was first created in 1974 by Jeff Webb as the Universal Cheerleaders Association. Since the early 2000s, when it had a short stint being publicly traded, Varsity underwent a series of mergers and acquisitions, including its 2011 invasion of Herff Jones, the academic goods company, which finally merged with BSN Sports in 2013. The following year, Webb sold the newly formed Varsity Brands—including Varsity Spirit, BSN Sports and Herff Jones—to Charlesbank Capital Partners for$ 1.5 billion, which four years later sold it to Bain for$ 2.5 billion.
Varsity has occasionally appeared to be the scourge of Bain’s life, with Varsity Spirit being frequently accused of operating as an unlawful dominance and cultivating a sex abuse culture in the game of team cheer.
Varsity’s economic status has worsened over that period, reflected in credit scores that slipped from B+ nine centuries back on S&amp, P’s grade level to B- in the current purchase. Moody’s gave Varsity a first-time grade of B3 on its size this year, which also considers Varsity Brands a “high-risk” lender with loan that is not investment grade—otherwise known as junk bonds.

” While we think the transaction is credit positive, we note that it entails higher interest costs, effectively increasing the company’s annual cash interest expense by about$ 20 million”, S&amp, P said in its note this week. We also do n’t think Varsity Brands ‘ new ownership will have any significant impact on its long-term strategy or operating performance.
Herff Jones was sold to Atlas Holdings for an undisclosed sum in October by Varsity.
At least 21 plaintiffs filed lawsuits alleging they had been assaulted by their cheer coaches while they were minors earlier this year, and the company settled one more. How much Varsity agreed to pay is unknown.
Varsity and Bain have also resolved two antitrust lawsuits filed since 2020—agreeing to pay$ 82.5 million to a class of “indirect consumers” and$ 43.5 million to group all-star cheer gyms—while a third suit was dismissed. And yet, the hits have kept coming.
This month, Nfinity, a competitor cheer merchandise company, filed a federal trademark infringement and unfair competition lawsuit against Varsity. Varsity and several of its insurers are currently at odds with one another over who will ultimately bear the cost of the sex-abuse settlement payments. Presumably, these legal burdens will soon shift to KKR, once the transaction is finalized. According to Moody’s, that is expected to come by the end of next month.