The bank debt for Levi Strauss & Co. slipped after two former employees filed a lawsuit against the company alleging that the San Francisco-based clothing maker had booked income and tax deductions incorrectly, thereby inflating profit. The company adamantly denies that there is any cause for the concern. "There's no fraud," said Joseph Mauer, Levi v.p. and treasurer. "This is a wrongful termination lawsuit. We take great offense that anyone would think the company accounted for things inappropriately." Mauer emphasized that accounting issues brought forth in the suit were approved by the company's former auditors, Arthur Andersen, as well as its new auditors, KPMG International.
Levi's bank debt was quoted in the 94-97 range after the news of the suit came out, down from the 98 3/4 context beforehand. A piece of the "B" loan was said to have traded in the 96 context, but the trade could not be confirmed. Mauer said he could not comment on any trading of the company's bank debt. Levels for the company's 115/8% notes, which sunk from the mid 90s into the high 70s to low 80s immediately following reports of the legal claim, recovered, inching into the mid to high 80s later in the day. One trader noted that the market is unsure of what happens next. If any bad news comes, out the bank debt paper will plummet down from the mid 90s levels, he speculated.