YS Garments LLC (d/b/a Next Level Apparel) received an equity cure in the third quarter from its financial-sponsor owner, Blue Point Capital Partners, to avoid breaching its minimum EBITDA covenant. Despite the cure, we forecast the company will breach its maximum leverage covenant in the fourth quarter, absent another equity cure. Next Level will need to refinance its revolver and term loan that become current in February and August 2025, respectively. We continue to believe the company faces refinancing risk associated with these looming maturities, and we believe a default due to a balance sheet restructuring or distressed exchange is possible absent positive developments within the next 12 months. We affirmed our issuer credit rating on Next Level at 'CCC'.
