Moody's Cites Levi Irrelevance, Tower Rating Dropped

  • 09 Sep 2001
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Moody's Investors Service has downgraded the bank-debt ratings of Levi Strauss & Co from Ba2 to Ba3, affecting $2.2 billion of debt, citing the continued erosion of the Levi's brand name. Despite denim being in a positive fashion cycle, sales continue to fall and there is a risk of further decline due to a perceived inability to maintain market relevance to a demographically diverse clientele, according to Moody's. The downgrade also reflects a higher than planned inventory level and low likelihood of meaningful reduction in the near term. The rating outlook is negative and if the company cannot fully address its design, sourcing, and inventory and supply management issues within the next year, it may face continued declines. Weaker cash generation could create liquidity risk due to scheduled bank amortizations and refinancing needs in 2003.

Continued difficulties in the U.S. retail segment led to a 9.2% decline in sales in the second quarter of 2001 as compared to the second quarter of 2000 and the Levi's brand showed softness, especially in the basic 550 jeans. But, the debt rating is supported by Levi's position as one of the largest branded apparel manufacturers in the world whose brands are widely recognized and still control significant market share. Calls to Joe Maurer, treasurer, were referred to spokeswoman Linda Butler, who said, Levi's acknowledges the challenges set out in the report. "Over the last 18 months we have made significant efforts to stabilize our sales, though the weakness of the retail market has slowed the attempts," she said. She added that one of the key strategies is to make the products more relevant to the market, such as the Levi's engineered jeans.

* Moody's has downgraded the ratings on the secured credit facilities available to subsidiaries of Boston-based American Tower to B1 from Ba3 affecting $2.51 billion of term loans and revolving credit facilities. The downgrade reflects the higher than expected leverage of the borrowers, and secured bank debt is a very significant part of the company's capital structure. Asset coverage is weaker than Moody's had anticipated as net debt per tower is expected to worsen over the medium term as the company spends more capital to build and acquire additional towers. However, American Tower's core business of leasing space on its towers to wireless telecommunications carriers remains strong. Moody's expects American Tower's tower rental business to continue to grow revenues and cash flow. Calls to Anne Alter, director of investor relations, were not returned.

* Moody's has downgraded Toronto-based SMTC's senior secured credit facility rating from Ba3 to B2 affecting $145 million of bank debt. SMTC provides advanced electronic manufacturing services such as printed circuit board assembly, rapid prototyping, and supply chain management. The downgrade reflects SMTC's operating losses, as the company was unable to reduce operating costs across its 10 installations on a pace that would offset its deteriorating gross margin. The company has approached its lenders to discuss a waiver or modification of its financial covenants. The rating is supported by the strength of SMTC's services, and IBM and Dell Computer have been long-term customers. Linda Millage, director of external reporting and investor relations did not return calls by press time

  • 09 Sep 2001

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 2,007 6 16.61
2 Goldman Sachs 1,798 4 14.88
3 BNP Paribas 1,434 4 11.87
4 Barclays 1,097 2 9.08
5 Morgan Stanley 1,094 2 9.06

Bookrunners of Global Structured Finance

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1 Citi 20,542.69 67 10.85%
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3 Bank of America Merrill Lynch 17,976.22 56 9.49%
4 Wells Fargo Securities 16,568.24 48 8.75%
5 Barclays 13,499.53 45 7.13%