Levi Strauss Lowered; Luggage Co. Looks Up

Softer sales paired with anticipated higher debt levels have led Fitch Ratings to lower Levi Strauss & Co.'s secured bank facility rating to BB- from BB. The ratings outlook is negative. Levi Strauss had $368 million in bank debt outstanding as of May 25. The ratings reflect that while the company originally expected sales for fiscal 2003 to grow 2-5%, sales are now expected to be flat due to weak consumer spending, according to Fitch. Also, Levi Strauss' primary means of distribution, the department store channel, has been consistently weak in 2003 as consumers diversify their shopping patterns.

Fitch notes that while debt levels were expected to rise, the earnings shortfall and higher inventory levels from the weak retail environment are resulting in a greater than expected increase in debt. Levi Strauss has amended its bank credit agreement to provide easier covenant levels, Fitch said. Calls to Levi Strauss officials were not returned.

*Moody's Investors Service has revised Samsonite Corp.'s ratings outlook to positive from developing to reflect the luggage company's announcement that it has reached an agreement with the Pension Benefit Guaranty Corp. (PBGC) and that its amended revolving credit agreement has become effective, which has removed immediate liquidity concerns and obstacles toward completing a deleveraging recapitalization. Moody's affirmed the B2 ratings for Samsonite's $60 million senior secured revolver due June 2004, its $35.2 senior secured European term loan due June 2004 and its $46.2 million senior secured U.S. term loan due June 2005.

The positive outlook is also supported by Samsonite's continued focus on cost savings, which has increased profitability and cash flows for its first fiscal quarter, despite sales pressures from a weak global economy and a soft travel environment due to the SARS virus and geopolitical events, said Moody's. Samsonite's ratings are likely to be upgraded if it achieves the proposed recapitalization, for which the company has accomplished board recommendation for the transaction, as well as favorable voting agreements from a majority of the common and preferred shareholders and a commitment letter for a new revolver from GE Capital. Calls to Samsonite officials were not returned by press time.