Moody’s Investors Service cut BCBG Max Azria Group Inc.’s credit rating two notches and said the company would likely violate its bank covenants.

The debt watchdog cut BCBG’s corporate family rating to “Caa2” from “B3,” indicating that the roughly $230 million in debt covered by the rating is judged to be “subject to very high credit risk.” The outlook on the rating is negative.

“BCBG’s credit metrics and financial flexibility have deteriorated significantly due to the company’s faster-than-anticipated exit from its mass market Wal-Mart business as well as a considerable decline in its wholesale revenues,” Moody’s said in its downgrade.

The rating agency also said “liquidity risk has increased, as the lower-than-expected earnings will likely cause the company to violate its bank covenants.”

A spokeswoman for BCBG said, “We are working with our lenders to modify our covenants in our loan agreement — business is good and we have a positive outlook for the future.”

BCBG operates 467 doors, including outlets and partner stores. Moody’s said revenues for the year ended Jan. 28 are expected to be “well below $800 million.”

The company is wholly owned by Max and Lubov Azria and its foreign operations are not part of the corporate entity rated by Moody’s.

Last week, Standard & Poor’s downgraded BCBG’s rating to “CCC-plus” from “B-minus” based on the possibility of a covenant violation.

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