Moody's drops Gold Toe to Caa2

Moody's Investors Service said it downgraded Gold Toe Moretz Holdings Corp.'s corporate family rating to Caa2 from B3, probability-of-default rating to Caa3 from Caa1, first-lien revolver and term loan facilities to Caa1 (LGD2, 22%) from B1 (LGD2, 22%), and the $105 million second-lien term loan to Ca (LGD4, 69%) from Caa2 (LGD4, 69%).

The outlook is negative.

According to Moody's, the downgrades reflect concern that the issuer may not be in compliance with financial covenants in its credit facilities as of June 30 and that any negotiations with lenders could be difficult in this challenging credit environment.

Gold Toe's weak operating performance stems mainly from soft economic conditions in the United States, which has caused retail customers to adjust inventory levels down due to lower foot traffic, the agency said.

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