Fitch revises Levi Strauss to positive

Fitch Ratings said it affirmed its issuer default rating on Levi Strauss & Co. at BB and revised the outlook to positive from stable.

In addition, the agency affirmed its rating on Levi's secured bank credit facility at BB+ and senior unsecured notes at BB-.

Levi had $1.4 billion of debt outstanding as of Aug. 24.

While Levi's business trends are currently soft, the outlook revision to positive reflects Fitch's view that Levi will begin to generate EBITDA growth in fiscal 2015 as some of the benefits from its global productivity initiative flow to the bottom line. In addition to taking significant cost out of the business, Levi's management is also committed to reducing debt levels and strengthening its balance sheet.

These factors are expected by Fitch to drive adjusted leverage toward the mid-3 times range over the next two years from 4.1 times currently. Fitch also expects free cash flow will be positive in the range of $200 million annually beginning in fiscal 2015 (ending November).

The rating continues to reflect Levi's well-known brands, strong market shares, and geographic diversity, as well as the challenging consumer environment pressuring top line performance, the agency said.

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