JPMorgan Prepares to Launch $6.5B Debt Package for Skechers Buyout by 3G Capital in June; Investors Note Tariff Impact on Syndication

JPMorgan is preparing to launch a $6.5 billion debt financing package to back 3G Capital’s acquisition of Skechers as soon as next week, according to sources, who added that the footwear brand’s exposure to tariffs has dominated investors’ concerns about getting involved.

JPMorgan is leading $4 billion in secured debt and $2.5 billion in unsecured PIK toggle notes to finance the $9.4 billion take-private deal, which was announced on May 5.

Skechers’ $4 billion secured debt is expected to be split across a U.S.-dollar denominated seven-year senior secured note, whispered in the high 7% to low 8% area, as well as term loans in both U.S. dollars and euros, according to a source. The $2.5 billion PIK toggle note is expected to price with about a 10% yield, according to sources, and be privately placed. Still, sources cautioned that terms on the deal are subject to change.

A Strong Brand in a Quiet Market

Leveraged finance bankers familiar with the deal see potential in the footwear giant’s track record and presence in an otherwise muted leveraged buyout market.

Skechers is a global brand with public financials and a generally strong track record, one banker said, adding that market participants will find the credit more attractive than others in the industry. In a tough sector like retail, “only the best of the best can get done,” the banker added.

The deal has seen strong demand from banks competing to provide financing, another banker noted, given Skechers’ strong position in budget footwear and the relatively low volume of primary deals in recent months.

“People saw a nice fee opportunity with this, and it should be a good payday for banks, especially since there haven’t been a lot of deals lately,” the second banker said.

3G Capital’s strong reputation might also help ease lenders’ concerns around tariffs, a third banker mentioned. They explained that the sponsor has “a massive amount of capital” and is highly selective with its investments, which tend to be long term. 3G’s most recent deals include its $7.1 billion majority stake investment in Dutch blinds and window shutters maker Hunter Douglas in 2021 and its $45 billion merger of Kraft Foods and Heinz in 2015 alongside Warren Buffett.

3G Capital contributed a large equity check for the Sketchers acquisition, which should help investors get comfortable with the deal, the banker said, although they acknowledged that its heavy tariff exposure may still impact the syndication.

“This is the first footwear/apparel deal to hit the primary since tariffs were announced, so the market is watching closely to see how it goes,” the banker said.

Tariff Risks

The apparel industry in the United States relies heavily on Asian manufacturing. According to the American Apparel & Footwear Association’s most recent data, about 97% of clothes and shoes purchased in the United States are imported, primarily from Asia.

Skechers is no exception. The brand’s products are “manufactured at independent factories around the world,” according to its website. The company primarily partners with facilities in China and Vietnam, which have been hit with some of the steepest tariffs from the Trump administration, multiple sources noted out of concern.

One high-yield investor looking at the deal said they do not consider Skechers to be an attractive credit in the retail sector. The investor cited single brand concentration, tariff uncertainty and “questionable competitive positioning” as reasons they passed on the deal.

In its favor, Skechers is on the less discretionary end of consumer spending, one buy-sider noted, which should protect it from a tariff shock versus a more discretionary credit such as Saks Global. Its older consumer base tends to be repeat customers, which insulates Skechers from the fashion risk seen in other consumer clothing credits.

Structurally, a euro term loan component for Skecher’s debt package would be wise, as tapping the primary across the U.S. dollar and euro market maximizes leverage against multiple financing sources, according to a banker. A euro tranche also provides an easy way to hedge out foreign-exchange exposure by denominating debt where cash flows are generated, a buy-sider added.

The banker also acknowledged that while U.S.-imposed tariffs on China are a concern that will likely be priced in, investors are “getting comfortable” with Skechers’ global diversification, noting that it sources much of its business to countries beyond the U.S. that fall outside the risk of Trump’s tariff policies.

Skechers trades on the New York Stock Exchange under the ticker SKX and was quoted today at about $62.03 a share, according to Yahoo Finance.

Skechers will become a privately held company upon completion of 3G Capital’s transaction, according to a press release. In Skechers’ first-quarter 2025 earnings, its first-quarter sales increased 7.1% as a result of a 7.2% increase internationally and a 6.9% increase domestically

3G Capital agreed to pay $63 per share in cash for all outstanding shares of Skechers, representing a premium of 30% to Skechers’ 15-day volume-weighted average stock price. The transaction includes the option for existing shareholders of Skechers to instead receive $57 in cash and one unlisted, non-transferable equity unit in a newly formed, privately held company that, following the closing of the transaction, will be the parent company of Skechers.

Greenhill, a Mizuho affiliate, acted as exclusive financial advisor, and Latham & Watkins LLP acted as lead legal counsel to Skechers. J.P. Morgan Securities LLC acted as exclusive financial advisor, and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as lead legal counsel to 3G Capital, with Kirkland & Ellis LLP serving as financing legal counsel.

JPMorgan and Skechers did not respond to requests for comment. 3G Capital declined to comment.