Levi Strauss' potential sale of its Dockers brand clothing business to buyout firm Vestar Capital Parners, which is reportedly close to being finalized, could bolster Levis' credit and fuel a run in its distressed bonds, according to fixed-income market professionals.
Patrick Blake, v.p. and senior analyst at Moody's Investors Service, said if Dockers is sold for $800 million, as expected, and the proceeds are used for debt repayment, the rating agency will consider changing its outlook or rating on Levi Strauss. "If all that works its way through to repayment of debt that would certainly be a credit plus," he said, although he noted Levi's has said it would accept as little as $650 million for Dockers.
The jeans maker announced earlier this year it intended to sell the line to reduce its debt. Jeff Beckman, spokesman, declined comment on a potential buyer or price, except to say the company is still in "the exploration process." Daniel O'Connell, founder and ceo of Vestar, did not return a call by press time.
Levi Strauss' $2.2 billion of debt is currently rated Ca by Moody's. The 12 1/4% of '12s rose two points to the middle of last week, to 106.
