MOODY'S ASSIGNS B1 RATING TO SR SEC. BANK CREDIT FACILITIES OF LEVITZ FURNITURE CORP.
New York, 08-21-95 -- Moody's Investors Service assigned a B1 rating to Levitz Furniture Corporation's secured bank credit facility. This is the first time that Moody's has rated Levitz Furniture Corporation's bank credit facilities.
The B1 rating reflects the seniority of the facility; its size relative to the company's capital structure and the likely value of the pledged collateral. The rating, while recognizing the secured nature of the facility is tempered by the fact that the company's best assets, its accounts receivables, have been sold. It also reflects the potential recovery values of the pledged assets. A sizable portion of the company's unencumbered real estate in located in regions of the country where economic conditions remain weak such as California and the Northeast. Recoveries from the liquidation of the assets may be tempered somewhat by the relative illiquid nature of the assets.
The $160 million facility, agented by Chemical Bank, matures on June 28, 2000, and consists of the following tranches: a $40 million revolving credit facility; a $75 million term loan facility and a $45 million note repurchase facility. Lenders are secured by a first priority security interest in substantially all of the assets of the borrower (except receivables which are sold to General Electric Capital Corporation according to a receivables purchase agreement) and its subsidiaries, and a perfected pledge of the outstanding stock of the borrower and its subsidiaries. Obligations are guaranteed by the borrower's subsidiaries and by Levitz Furniture Incorporated, the borrower's parent which sole asset is the common stock of the borrower. The company owns presently 27 stores which serve as collateral to the lenders, with a carve-out of $20 million representing properties mortgaged to other lenders. Where permitted, the company's banks have a second mortgage on these respective properties.
On August 9, 1995, Moody's lowered the rating on the company's $97.6 million issue of senior notes to B2 from B1 and the rating on its $100 million senior subordinated notes to B3 from B2. The downgrade was prompted by the continued decline in same store sales and the need to refinance a substantial amount of debt which becomes due in fiscal 1997. The ratings also reflect the increased leverage as a result of higher borrowings and reduced cash flow from earnings; increased competition in some of its markets; and the company's weak balance sheet. The ratings do, however, recognize the company's position as a leading nationwide specialty retailer of furniture; its longstanding relationships with national brand name furniture manufacturers. The rating outlook remains negative.
Levitz Furniture Incorporated, through its wholly owned subsidiary Levitz Furniture Corporation, is leading US specialty furniture retailer operating 72 warehouse-showrooms and 62 satellite stores located in 26 states. The company is based in Boca Raton, FL.
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