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Moody’s Upgrades PVH to ‘Positive’

Move reflects integration of Warnaco assets and accelerated debt reduction.

Moody’s Investors Service has revised PVH Corp.’s rating outlook to “positive” from “stable” based on the accelerated reduction of the company’s debt since its acquisition of The Warnaco Group Inc. and progress in the integration of Warnaco’s operations.

PVH, which closed its purchase of Warnaco in February 2012, said last week it is seeking to amend its credit facilities to generate an additional $600 million in cash that would be used, along with cash on hand, to redeem $600 million in senior notes due in 2020 and carrying interest of 7.375 percent.

PVH said it had repaid $500 million of the term loans under the critical facility, above the $400 million anticipated earlier.

It also affirmed its expectations for fourth-quarter and full-year earnings and revenues. Sales for the year just completed are expected to hit $8.22 billion.

In lifting PVH’s outlook, Scott Tuhy, vice president and senior credit officer, stuck with the “Ba2” corporate family rating and the “Ba1” rating on the company’s nearly $4 billion senior credit facilities.
Ratings in the “Ba” family are deemed to have “substantial credit risk.”

“We expect the company will make further progress reducing leverage over the next 12 to 18 months, primarily from utilizing free cash flow to reduce debt, but also through realizing continued cost savings from the [Warnaco] merger while maintaining good performance across its portfolio of brands,” Tuhy wrote.

Shares of PVH rose 1.8 percent to $123.42 in morning trading Monday.