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21 Jan 2011
Approximately $110 million of rated debt affected
New York, January 21, 2011 -- Moody's Investors Service revised the ratings outlook of BCBG Max
Azria Group, Inc. ("BCBG") to developing from
positive, reflecting concerns over significant near term maturities
and deteriorating covenant cushion under the company's first lien
term loan agreement. Moody's also affirmed all ratings,
including the Caa1 Corporate Family Rating.
The developing outlook incorporates heightened liquidity pressures stemming
from the August 10, 2011, maturity of its $110 million
first lien term loan, as well as some uncertainty regarding the
company's ability to meet a January 30, 2011, leverage
ratio covenant. Furthermore, BCBG's ABL revolver (unrated
by Moody's) contains a springing maturity that would trigger a June
2011 maturity if the company has not paid off or refinanced its first
lien term loan 45 days prior to the first lien maturity. Moody's
believes BCBG relies heavily upon this revolver for seasonal working capital
needs. Finally, the company will also need to address refinancing
of its second lien term loan (approximately $222 million outstanding),
which matures on March 30, 2012.
BCBG Max Azria Group, Inc.
....Senior Secured First Lien Term Loan,
Affirmed B3, LGD adjusted to LGD3, 37% from LGD3,
....Outlook, Changed To Developing From
....Affirmed Caa1 Corporate Family Rating
....Affirmed Caa1 Probability of Default Rating
The Caa1 Corporate Family Rating continues to reflect operational volatility
associated with the underperformance of BCBG's Max Rave business,
as well as weak liquidity, including a substantial current debt
load of approximately $265 million coming due though August 2011
(including outstandings under the ABL revolver, which would mature
in June 2011 absent a refinancing of the first lien). Furthermore,
BCBG's high leverage (in the high 5 times debt-to-EBITDA
range per Moody's standard adjustments) poses challenge for operating
in a business sensitive to both economic cycles and fashion trends.
BCBG's well recognized brands and signs of stability in the core
BCBG business (excluding Max Rave retail) support the rating.
Subsequent rating actions will be predicated upon the company's
ability to address the near term maturities in its capital structure.
Inability to execute on an extension of maturities in the very near term,
or further sustained losses from the Max Rave business, would likely
negatively impact the ratings.
Conversely, resolution of the developing outlook could occur if
BCBG can demonstrate a sustained track record of operational stability,
including evidence of a credible plan to eliminate operating losses at
the Max Rave retail business. A favorable resolution of the developing
outlook would also require expectations for BCBG to sustain an adequate
liquidity profile, including extension of maturities.
BCBG Max Azria Group, Inc., headquartered in Vernon,
California designs, markets, distributes and licenses women's
apparel, footwear and accessories. Revenue for the twelve
months ended October 30, 2010 approximated $1.1 billion.
The company is wholly owned by Max and Lubov Azria.
Moody's last rating action was on October 14, 2009 when it
raised BCBG's Corporate Family Rating to Caa1 from Caa2, and
assigned a positive outlook.
The principal methodology used in rating BCBG is Moody's Global Retail
Industry rating methodology, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab (December, 2006, document #100824).
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's revises BCBG's outlook to developing from positive; affirms ratings
250 Greenwich Street
New York, NY 10007
No Related Data.
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