YS Garments LLC

The stable outlook reflects our expectation that Next Level will continue to reduce leverage to the mid- to high-3x area over the next two years due to relatively good revenue growth and cost control. We could lower our ratings if we forecast that the company will sustain leverage above 5x. This could be caused by intensified competition in the fashion basics industry, an inability to pass on to customers input cost spikes, or deteriorated relationships with its core customers. Although unlikely over the near term, we could raise the ratings if the company successfully diversifies its customer base and product offering, while meaningfully expanding internationally and maintaining leverage below 5x. U.S. real GDP increases by 2.2% in 2019 and by

...The company has very high customer concentration, with a majority of revenue earned from its top two customers.YS Garments LLC (d/b/a Next Level Apparel) sells to national and regional distributors, as well as a network of decorators. Although it has multiyear relationships with many of these customers, it generates almost 60% of its revenue from just two of them, and more than 75% from its top four customers. As a result, the company is vulnerable to negative changes in the health and ordering patterns of these customers. While we do not anticipate this over the next year, a loss of even one of these key customers could have a significant negative impact on the company's profitability and credit measures. Ownership by a financial sponsor constrains ratings, but leverage is relatively moderate compared to other sponsor-owned companies. Private equity firm Blue Point Capital Partners acquired the majority of Next Level's equity in a leveraged buyout (LBO) in June 2018, increasing leverage...

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