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Fitch cuts Saks notes to B, outlook negative
Fitch Ratings said it downgraded Saks Inc.'s senior unsecured notes to B with a recovery rating of 4 from B+ with a recovery rating of 3.
Fitch said it also affirmed Saks' B issuer default rating and BB $800 million secured bank facility with a recovery rating of 1 and removed Saks from Rating Watch negative, where it was placed on April 29.
The outlook is negative.
The rating actions follow Saks' announcement that it has agreed to sell its Northern Department Store Group to Bon-Ton for $1.1 billion during the first quarter of fiscal 2006. A substantial portion of the proceeds from the sale will be used for share repurchases and/or a special dividend, with a resulting increase in financial leverage, the agency said
Fitch said the affirmation of the issuer default rating considers Saks' narrow business focus following this transaction and weak operating results at the core Saks Fifth Avenue division, offset in part by the division's internationally recognized luxury franchise and recent debt reduction following the sale of the Southern Department Store Group.
The downgrade reflects a lower anticipated recovery for the senior unsecured notes due to expected limited additional debt reduction and lower operating cash flow as a result of the pending sale of the Northern Department Stores.
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