S&P changes Levi Strauss view

S&P said it revised Levi Strauss & Co.’s outlook to negative from stable.

Levi Strauss is issuing a $300 million incremental add-on to its existing 5% senior notes due in 2025 to enhance its liquidity position.

“We expect Levi Strauss will face significant sales and profitability declines in the upcoming quarters due to store closures and a drop in consumer spending on nonessential items arising from the Covid-19 pandemic and resulting economic recession,” the agency said in a news release.

“As a result, we forecast the company's credit measures will weaken and leverage will temporarily exceed 2x in fiscal 2020.”

The agency also affirmed the BB+ issuer credit rating and BB+ issue-credit rating on the company's two tranches of senior unsecured notes due in 2025 and 2027. The recovery ratings on these notes remain 3 but the recovery prospects decreased to 60% from 65% due to the larger debt balance at default following the proposed incremental debt add-on.

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