Moody's lowers G&G Retail ratings

Moody's Investors Service said it downgraded the senior unsecured notes of G&G Retail Inc. to Caa3.

The outlook is negative.

Moody's said the downgrade of G&G's ratings reflect its continued deterioration in operating performance, which has lead to extremely high leverage, poor interest coverage, and significant liquidity concerns.

G&G reported in December that it may not be able to meet its cash requirements in fiscal year-end 2005 and has begun approaching its note holders about a possible restructuring of its senior unsecured notes. The company has also stated that it is also pursuing an investment of additional capital.

The ratings also reflect G&G's weak tangible asset coverage, the risks and volatility involved with retailing apparel to an extremely trend conscious segment of the market, which is partially mitigated by G&G's domestic sourcing arrangements.

Moody's said the outlook is negative based upon Moody's belief that the company is unlikely to be able to restructure its senior unsecured notes without significant impairment to the noteholders. Future ratings movements will depend on G&G's ability to improve operating performance and liquidity in the near term.

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