Moody's drops Loehmann's

Moody's Investors Service said it downgraded the long term ratings of Loehmann's Capital Corp., including its corporate family rating to Caa1 and speculative-grade liquidity rating to SGL-4.

The outlook is negative.

The agency said that the downgrades reflect Loehmann's declining operating profits resulting in weakened liquidity, very poor credit metrics, notably Debt/EBITDA of 8.7x and EBITA/Interest Expense of 0.1x, and negative free cash flow.

The agency said that the following ratings are downgraded: probability of default rating to Caa1 from B2, $20 million class A senior secured floating rating notes to Caa1 (LGD3-48%) from B2 (LGD3-46%), $55 million class A 12% senior secured notes to Caa1 (LGD3-48%) from B2 (LGD3-46%) and $35 million class B senior secured notes to Caa3 (LGD5-89%) from Caa1 (LGD5-89%).

The rating reflects Moody's concerns that Loehmann's liquidity profile will erode further given the company's expected negative free cash flow, the reduction of cash levels and lower levels of revolver availability.

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