Moody's: Charming Shoppes stable

Moody's Investors Service said it affirmed the long-term debt ratings of Charming Shoppes Inc. and changed the outlook to stable from negative. Ratings affirmed include the company's Ba3 senior implied rating, B2 rating on the senior unsecured convertible notes, and B2 issuer rating.

The change in outlook reflects the company's improvement in operating performance, reduction in funded debt levels, and the additional financial flexibility provided by the extension of its revolving credit facility to August 2008.

Moody's said Charming Shoppes' ratings reflect its high effective leverage (including adjustments for operating leases and off balance sheet financing of credit card receivables), its low EBITDA margin for a specialty apparel retailer, and increasing competition for the plus-size customer.

The ratings also consider Charming's strong presence in the plus-size segment, well recognized brand names, positive demographic trends as American women become heavier, and relatively low levels of funded debt. In addition, the ratings also reflect the good asset quality and the strong liquidity provided by the company's $300 million secured revolving credit facility and a cash balance of $145 million at May 1.

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