Moody's cuts Kellwood notes to Ba3

Moody's Investors Service said it affirmed Kellwood Co.'s Ba2 corporate family rating and downgraded the company's $270 million senior unsecured notes to Ba3 from Ba2 following the completion of a secured-asset-based credit facility that replaced an unsecured revolving credit facility. The outlook is negative.

The agency said the downgrade reflects the effective subordination of the remaining unsecured creditors to the new secured credit facility and the release of the subsidiary guarantees since they were linked to the terminated credit facility.

Kellwood's ratings reflect the diversification by brand, product category and price point, Moody's said. .The ratings are also supported by the company's ample liquidity.

On the downside, the agency said the ratings consider the challenges the company has faced in launching new brands and the disruption and expense associated with repositioning of its legacy brands and the concern that as the company acquires brands that compete at better price points, the increased fashion risk could introduce higher volatility to sales and profitability.

Adjusted debt to EBITDA is 7x.

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