Gildan Activewear's $1.2 Billion Debt Offering: Capital Structure Strategy and Implications for Financial Flexibility

Gildan Activewear Inc. has executed a $1.2 billion senior unsecured notes offering to fund its landmark acquisition of Hanesbrands Inc., a move that underscores its aggressive strategy to consolidate market share in the global basic apparel sector. The offering, split into two series—$600 million of 4.700% notes due 2030 and $600 million of 5.400% notes due 2035—reflects a calculated approach to managing refinancing risk while securing long-term capital for strategic growthGildan Announces Pricing of Private Offering of US$1.2 Billion^[1]. This analysis evaluates the implications of this debt issuance for Gildan's capital structure, financial flexibility, and shareholder returns, drawing on recent financial metrics, analyst projections, and credit ratings.

Strategic Rationale and Capital Structure Optimization

Gildan's decision to issue debt with staggered maturities—extending to 2035—demonstrates a deliberate effort to align its capital structure with long-term operational goals. By splitting the offering into two tranches, the company spreads refinancing risk over a decade, avoiding a concentration of maturities that could strain liquidity in the medium termGildan Activewear Inc. Announces $1.2 Billion Senior Unsecured Notes Offering to Fund Hanesbrands Acquisition^[2]. The private placement structure, targeting qualified institutional buyers under Rule 144A and non-U.S. investors under Regulation S, also accelerates execution, a critical factor in securing the Hanesbrands dealGildan Announces Pricing of Private Offering of US$1.2^[3].

Pre-acquisition, Gildan's debt-to-equity ratio stood at 1.37 as of June 2025, up from 1.14 in fiscal 2024, signaling a trend of increasing leverageGildan Activewear Debt to Equity Ratio 2010-2025^[4]. However, its interest coverage ratio remains robust at 6.49 (Q2 2025) and 7.17 (FY2024), indicating capacity to service debt obligationsGildan Activewear (NYSE:GIL) Interest Coverage Explanation^[5]. Post-acquisition, leverage is projected to rise to 2.6x adjusted EBITDA, with a stated target to reduce this to 2.0x or below within 12–18 monthsWhy Gildan’s $4.4bn acquisition of HanesBrands may redefine^[6]. This trajectory suggests confidence in the acquisition's ability to generate synergies, including $200 million in annual cost savings by 2028Gildan and HanesBrands Agree to Combine To Create a Global^[7].

Financial Flexibility and Risk Mitigation

The new debt issuance adds to Gildan's existing maturity schedule, which includes C$700 million in notes maturing through 2030Gildan Activewear Inc. Prices C$700 Million Senior Unsecured^[8]. While the combined debt load raises concerns about liquidity, the company's pro forma EBITDA of $1.6 billion (trailing twelve months) provides a strong foundation for debt servicingFitch Rates Gildan's Unsecured Debt Including Proposed Notes^[9]. Fitch Ratings has affirmed a stable outlook for Gildan's BBB credit rating, citing the acquisition's potential to enhance scale and operational efficiencyGildan Activewear Surges with Hanesbrands Acquisition and^[10].

Critically, the offering funds both the cash component of the Hanesbrands acquisition and the refinancing of Hanesbrands' existing $2 billion in debtGildan’s Unsecured Debt Rated Baa3 by Moody’s, BBB- by S&P^[11]. This dual-purpose structure reduces immediate cash outflows and aligns with Gildan's history of leveraging debt to optimize capital allocation. Analysts at RBC Capital and CIBC have upgraded their price targets for GIL, reflecting optimism about the acquisition's revenue synergies and Gildan's ability to navigate macroeconomic headwindsRBC Capital and CIBC Analyst Reports on Gildan (August 2025)^[12].

Shareholder Returns and Long-Term Value

The acquisition has prompted Gildan to pause share repurchases until leverage returns to its target range of 1.5–2.5x EBITDAWhy Gildan’s $4.4bn acquisition of HanesBrands may redefine^[13]. While this may disappoint short-term income-focused investors, the strategic rationale—doubling the company's revenue base and expanding into retail brands—positions Gildan for long-term value creationGildan Reports Results for the First Quarter of 2025^[14]. Analysts project that the combined entity's adjusted EPS will see significant accretion, supported by Hanesbrands' iconic brand portfolio and Gildan's cost-efficient manufacturing scaleGildan Activewear Inc. Announces $1.2 Billion Senior Unsecured Notes Offering to Fund Hanesbrands Acquisition^[15].

Conclusion

Gildan's $1.2 billion debt offering represents a high-stakes bet on long-term growth, balancing near-term leverage increases with strategic operational synergies. The staggered maturity structure and private placement approach highlight a disciplined capital strategy, while strong credit metrics and analyst optimism suggest the company is well-positioned to manage the added debt. For investors, the key risks lie in execution—realizing the projected $200 million in annual cost savings—and macroeconomic volatility. However, the acquisition's potential to redefine Gildan as a global apparel leader, coupled with a stable credit outlook, makes this a compelling case study in strategic debt utilization.