S&P rates Genesco loan BB-

Standard & Poor's said it assigned its BB- bank loan rating along with a recovery rating of 3 to Genesco Inc.'s proposed $175 million senior secured credit facilities and affirmed its outstanding ratings on Genesco, including the BB- corporate credit rating.

The affirmation follows the company's mostly debt-financed acquisition of Hat World, a specialty retailer of branded and licensed headwear, for about $165 million. The acquisition will be funded with about $100 million in borrowings from the term loan, availability under the revolving credit facility, and cash on hand, which amounted to about $82 million as of Jan. 31.

S&P said the speculative-grade ratings on Genesco continue to reflect high business risk stemming from the company's participation in the competitive footwear retailing industry, its aggressive growth strategy, and high debt leverage.

Following a few years of positive operating performance, results softened in 2003, with consolidated same-store sales declining 2%. In this period, same-store sales at Genesco's core concept, Journeys, declined 1% due to product mix changes, resulting in lower average price points.

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