Weight Watchers International is an American company that offers various products and services to assist weight loss and maintenance. Founded in 1963 by Queens, New York, homemaker Jean Nidetch, it now operates in about 30 countries around the world, generally under names that are local translations of “Weight Watchers”. The core philosophy behind Weight Watchers programs is to use a science-driven approach to help participants lose weight by forming helpful habits, eating smarter, getting more exercise and providing support.
Weight Watchers has been under-performing for several quarters. Recently the CEO departed. However, BDC exposure is minimal at $3mn, and confined to a $2 billion Senior Term debt by two BDCs. American Capital Senior Floating or ACSF has written down its exposure by 10%, but NexPoint bought at a discount and carries its exposure at a premium. We expected IIIQ values to drop from the June level, but they remained essentially unchanged at both BDCs. The Company is aiming to reduce leverage through 2018. The current Revolver has been paid down and the goal is to get net debt to EBITDA under 4.5X within the next 2 years. Currently the Company has $1.2bn in debt and EBITDA of $265mn, and hopes to increase revenues to $1.4bn to get to its leverage target. However, with only modest growth recently and no CEO in place (a search is underway), Weight Watchers remains on the Watch List with a Credit Rating of 3. However, the IVQ 2016 Credit Trend should be up on the back of the Revolver pay-down.