Moody’s might raise Kate Spade

Moody's Investors Service said it placed Kate Spade & Co.’s Ba3 corporate family rating, Ba3-PD probability of default rating and the Ba3 rating on its $400 million senior secured term loan under review for upgrade.

The outlook was changed to rating under review from stable.

The review follows the May 8 announcement that the company signed a definitive agreement to be acquired by Coach, Inc. (Baa2 RUR down) for an enterprise value of about $2.4 billion.

The transaction is subject to customary closing conditions and regulations and is expected to close in the third calendar quarter of 2017.

Moody’s said the review reflects expectations that the acquisition by Coach will improve Kate Spade's credit profile, as Coach has a stronger credit profile than Kate Spade as reflected by its higher rating. In addition, Kate Spade's debt is expected to be repaid based on permitted change of control language in the existing term loan credit agreement, the agency explained.

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