Loan Evaluation Report
ABC Investment Corporation
Client: Gildan Activewear Inc.
August 24, 2022
To: John Doe, Supervisor, ABC Investment Corporation
Date:
Applicant:
Address:
Contact:
August 24, 2022
Gildan Activewear Inc.
725 Montée de Liesse, Montreal, Québec, Canada H4T 1P5
Rhodri J. Harries, Executive Vice-President, Chief Financial and Administrative Officer
Tel: (514) 735-2023, Fax: (514) 735-2024
E-Mail: Rhodri.harries@gildan.com
Loan Purpose:
To purchase new yarn spinning equipment for expansion of textile and sewing manufacturing operations
Financing Program:
Project Costs
Equipment
Amount
Financing
$5,000,000.00 Equity
ABC Investment Corp. - Loan
Totals
$5,000,000.00 Totals
Amount
$500,000.00
$4,500,000.00
$5,000,000.00
Background:
Gildan is one of the world’s leading manufacturers of apparel, socks, legwear, with more than three decades of
developing a large-scale manufacturing base and specialized skill set. In 1946, Joseph Chamandy starts Harley Inc., a
basic children’s apparel manufacturing company, which produces activewear, apparel and sleepwear in Montreal,
Canada. In 1984, the company becomes a vertically integrated manufacturing company as it acquires a knitting mill
with circular machines. The company names changed to Gildan Textiles Inc. in 1998, Gildan initiates its initial public
offering and becomes publicly listed on Toronto Stock Exchange (TSX) and and American Stock Exchange (AMEX). 1
Gildan’s Vision: Our vision is a long-term aspirational goal for what we want to achieve through our collective efforts.
Far beyond simply making great quality products, our vision is to leverage our vertically integrated manufacturing
model and the expertise and scale we have built over the years to positively influence how apparel is made. We seek to
improve the impacts we have on our people, their communities, the environment, and all our stakeholders. 2
Gildan’s Mission: We create value for customers by delivering superior quality products for the whole family at everyday
low prices, have a positive influence on the communities where we operate by acting responsibly and generating
positive economic impacts and empower our employees to succeed while treating them with respect and dignity,
because we know they are the key to our success.2
Leadership Team and Corporate Structure:
Gildan’s leadership team has two branches: Management and Board of Directors.
Management Team includes Glenn J. Chamandy (President and Chief Executive Officer), Rhodri J. Harries (Executive
Vice-President, Chief Financial and Administrative Officer), Benito Masi (President, Manufacturing), Chuck J. Ward
(President, Sales, Marketing and Distribution), and Arun Bajaj (Executive Vice-President, Chief Human Resources Officer
& Legal Affairs).
The Board of Directors members are Donald C. Berg (Chairman), Maryse Bertrand (Committee Chair: Corporate
Governance and Social Responsibility), Marc Caira (Committees: Audit & Finance, Corporate Governance & Social
Responsibility), Glenn J. Chamandy (President & Chief Executive Officer), Shirley E. Cunningham (Committee: Corporate
Governance & Social Responsibility), Russell Goodman (Committees: Compensation & Human Resources and Audit &
Finance), Charles M. Herington (Committees: Compensation & Human Resources, Corporate Governance & Social
Responsibility), Luc Jobin (Committee Chair: Audit and Finance), Craig A. Leavitt
(Committees: Audit & Finance, Compensation & Human Resources), Anne Martin-Vachon
(Committees: Compensation & Human Resources, Corporate Governance & Social Responsibility), Dhaval Buch
(Committee: Corporate Governance and Social Responsibility, Audit and finance). 3
1
https://gildancorp.com/en/company/our-story
https://gildancorp.com/en/company/vision-mission-values/
3
https://gildancorp.com/en/company/leadership/
2
4
https://www.sustainalytics.com/esg-rating/gildan-activewear-inc/1008265759
Gildan’s 2022 Second Quarter Shareholder Report – used for analyzing the 5 c’s of credit
:https://gildancorp.com/media/uploads/reports/bgildan_q2_2022_shareholder_report.pdf
2|Page
The Board strives for continuous improvement in its corporate governance practices to ensure continued effective
oversight of management and of Gildan's business affairs, as well as to make sure the governance framework not only
meets regulatory requirements but also reflects evolving best practices.
Below is the visual representation of Gildan’s corporate structure.
Project Description:
In 2019, Gildan purchased a yarn-spinning facility in Eden, North Carolina. They planned to revamp the facility and
upgrade it to Gildan’s standards.1 Loan requested amount is $4,500,000 amortized over 10 years with an interest rate
of 6.70%. The estimated monthly payment is $51,656. This loan will be used to purchase a new $5,000,000 yarnspinning equipment in Canada which will be shipped and installed in the North Carolina facility.
ESG Risk Rating:
Gildan’s Environmental, Social, and Governance (ESG) Risk Rating is categorized under low risk. ESG score is a measure
of a company's exposure to long-term environmental, social, and governance risks that are often overlooked during
traditional financial analyses. Comprehensive Framework means that it classifies a company as a part of its
comprehensive universe or core universe primarily by its market capitalization as well as its inclusion in major global
and regional indexes.4
1
https://gildancorp.com/en/company/our-story
https://gildancorp.com/en/company/vision-mission-values/
3
https://gildancorp.com/en/company/leadership/
2
4
https://www.sustainalytics.com/esg-rating/gildan-activewear-inc/1008265759
Gildan’s 2022 Second Quarter Shareholder Report – used for analyzing the 5 c’s of credit
:https://gildancorp.com/media/uploads/reports/bgildan_q2_2022_shareholder_report.pdf
3|Page
1) Character (credit and willingness to pay):
In 2022, the company launched its “Gildan Sustainable Growth” (GSG) strategy focused on driving organic top and
bottom-line growth through three key pillars – capacity expansion, innovation, and ESG. They believe that by
leveraging their competitive advantage as a low-cost, vertically integrated manufacturer and successfully executing
on well-defined capacity expansion plans, delivering value-driven and innovative products, and through leading
ESG practices, it will position them well to drive strong revenue growth, profitability, and effective asset utilization,
all of which are expected to allow them to deliver compelling shareholder value creation. Hence, with the focus on
capacity expansion pillar, the acquisition of the yarn facility in North Carolina will help build on its global vertically
integrated supply chain through further internalizing yarn production and is expected to support incremental yarn
needs for Gildan’s textile capacity expansion plans in Central America and the Dominican Republic. Gildan has and
will continuously acquire assets through financing to improve their operations in line with their GSG strategy.
Gildan has a strong record of paying their financial obligations on time or even earlier if possible. On April 20, 2021,
the Company fully repaid its $400 million unsecured two-year term loan which was due on April 6, 2022. In
addition, the Company is in compliance with all financial covenants at July 3, 2022 and expects to maintain
compliance with its covenants over the next twelve months, based on its current expectations and forecasts.
2) Capacity (cash flow and ability to service the debt):
In July 2022, Gildan reported that their net debt leverage ratio (as shown below) increased since January 2022
from 0.7 to 1.1, which means that their net debt is greater than their earnings before interest, taxes, deprecation,
and amortization (EBITDA) of $798.1M. It is always ideal to have less than 1 net debt leverage ratio to ensure the
company will have enough earning to pay their debt obligations.
Their current ratio remains steady at 3.1, which means that they have more than enough liquid asset to pay their
current debt obligations. Their total assets amount is $1,634.6M and total liabilities amount is $525.1M. Working
capital was $1,110 million as of July 3, 2022, compared to $984 million on January 2, 2022.
1
https://gildancorp.com/en/company/our-story
https://gildancorp.com/en/company/vision-mission-values/
3
https://gildancorp.com/en/company/leadership/
2
4
https://www.sustainalytics.com/esg-rating/gildan-activewear-inc/1008265759
Gildan’s 2022 Second Quarter Shareholder Report – used for analyzing the 5 c’s of credit
:https://gildancorp.com/media/uploads/reports/bgildan_q2_2022_shareholder_report.pdf
4|Page
3) Capital (equity or net worth):
Fixed assets to long term liabilities ratio is calculated to be 1.26 (1,030 M/815 M). This indicates that Gildan have
enough fixed assets to secure their long-term liabilities.
Their debt-to-equity ratio is 0.8 ($1,492 M/$1,863 M). This means that majority of Gildan’s assets are funded
through equity as it has $0.80 of debt for every dollar of equity. This proves that Gildan’s shareholder have
invested into their company.
With this project, Gildan is committed to provide a 10% of the project cost as equity.
4) Conditions (business, industry & economic conditions affecting the business):
The basic apparel market is highly competitive. Competition is generally based upon service and product
availability, price, quality, comfort and fit, style, and brand. Gildan compete on these factors by leveraging their
competitive strengths, including their strategically located and vertically integrated manufacturing supply chain,
scale, cost structure, global distribution, and our brand positioning in the markets they serve. Overall, the
manufacturing skill set, with large-scale, low-cost vertically integrated supply chain infrastructure that they have
developed by investing significantly over time, are key competitive strengths and differentiators from their
competition.
There are disruptions to manufacturing and distribution activities due to such factors as operational issues,
disruptions in transportation logistic functions, labour shortages or disruptions, political or social instability,
weather related events, natural disasters, epidemics and pandemics, such as the COVID-19 pandemic, and other
unforeseen adverse events.
Interest rate in Canada increased from (June) 3.7% to (July) 4.7%. Should this loan be approved, Gildan will be able
to lock in a fixed interest rate of 6.7% (2% + prime rate of 4.7%).
5) Collateral (security):
The equipment that will be purchased for $5,000,000 will be placed as a collateral.
Recommendation:
Throughout the years, the company thrives to expand their operations. It is perfectly normal for this capital-intensive
industry to continuously acquire new facilities and equipment in order to remain competitive in the market. The loan
amount to purchase a new equipment is minimal compared to the total assets that Gildan currently owns. With much
deliberation as written above, I recommend approval of the loan application.
1
https://gildancorp.com/en/company/our-story
https://gildancorp.com/en/company/vision-mission-values/
3
https://gildancorp.com/en/company/leadership/
2
4
https://www.sustainalytics.com/esg-rating/gildan-activewear-inc/1008265759
Gildan’s 2022 Second Quarter Shareholder Report – used for analyzing the 5 c’s of credit
:https://gildancorp.com/media/uploads/reports/bgildan_q2_2022_shareholder_report.pdf
5|Page