S&P upgrades Genesco loan to BB

Standard & Poor's said it revised its outlook on Genesco Inc. to positive from stable, raised the bank loan and recovery ratings on Genesco's senior secured credit facility to BB from BB- and to 1 from 2, respectively, and affirmed the company's BB- corporate credit rating and B subordinated debt rating.

S&P said the outlook revision is based on Genesco's improved operating results in the fiscal year ended Jan. 28, increasing business diversity following the successful integration of Hat World and the company's strengthening credit protection measures.

The bank loan upgrade follows Genesco's use of free cash flow to reduce its term loan to about $20 million from $100 million; thus, with $95 million of secured debt, recovery prospects are enhanced under the agency's simulated default scenario.

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

These risks are tempered by an improving financial profile and a more diversified business profile, the agency said. Better-than-expected earnings and debt reduction efforts strengthened the company's lease-adjusted total debt to EBITDA to about 3.2x and EBITDA interest coverage to about 3.8x in fiscal 2005.

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