An auction of Warnaco Group's bank debt failed last week, with bids falling below the 65 asking price. Dealers pointed to rough times in the textile industry and a legal fight between the company and Calvin Klein as reasons for the divide between buyers and the seller. "I don't think the bids will go above 54," one market watcher predicted, with another adding, "They wanted 65 for it, when it's going into the 50s." Industrial Bank of Japan was reportedly the seller, but officials there did not comment by press time. A Warnaco spokesman said he's unaware of any trading in the bank debt. "Under the current structure the company would get notice if there was a trade," he said, declining further comment.
Moody's Investors Service downgraded the company's $450 million revolving credit facility to Ba2 from Ba1 because its high leverage has limited its financial flexibility. Dealers noted its current legal battle with Calvin Klein, with each company accusing the other of trademark violation,s and one dealer predicts levels will slide to the 30s before any trades occur. Calls to Calvin Klein were referred to a public relations firm, which did not return them by press time. Spokesmen for both banks did not return calls for comment.