Fitch downgrades Coach to BBB-

Fitch Ratings said it downgraded Coach, Inc.’s long-term issuer default rating to BBB- from BBB following the closing of the previously announced Kate Spade & Co. acquisition.

Coach was removed from negative watch and the ratings were assigned a stable outlook.

At closing, the Kate Spade acquisition caused Coach's adjusted leverage to increase to 3.7 times on a pro forma basis from the previous 2.6 times level.

To fund the $2.4 billion acquisition, which represents a 9 times EBITDA multiple on Kate Spade's TTM results, Coach issued $2.1 billion of debt, including $1 billion of unsecured notes, an $800 million six-month term loan credit facility and a $300 million three-year term loan facility.

Leverage is expected to decline to around 3.3 times at the end of fiscal 2018 upon repayment of the $800 million six-month term loan. Leverage is expected to trend to under 3 times in fiscal 2020 on EBITDA growth

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