S&P cuts G+G Retail to CC

Standard & Poor's said it lowered its ratings on G+G Retail Inc. to CC from CCC.

The outlook is negative.

S&P said the downgrade is based on G+G's announcement that the company has reached an agreement in principle with bondholders to exchange the company's 11% senior notes due 2006 and outstanding preferred stock of G&G Holdings for new common stock of the company.

Because terms of the exchange call for bondholders to receive patently less than par value, S&P said it views the debt restructuring transaction to the detriment of bondholders. Upon completion of the exchange, expected by the end of March, S&P said the ratings will be lowered to D, even though no legal default will have occurred.

S&P said G+G's operating performance has been very weak, with a sharp decline in same-store sales of 13.8% for the nine months ended Nov. 1. A significant decline in average selling price, increased markdowns to clear inventory, and a poorly received merchandising mix contributed to the company's poor operating performance.

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