Standard & Poor’s Ratings Services has lowered the corporate credit rating of NYDJ Apparel LLC’s a single notch and ratings on $162.5 million of credit facilities two notches.
The corporate credit rating was reduced to “B-minus” from “B” “primarily because of reduced consumer demand in the women’s premium denim market,” resulting in a deterioration of credit measures.
S&P lowered ratings on NYDJ’s $12.5 million revolver due in 2019 and its $150 million first-lien term loan due in 2020 by two notches to “B-minus” from “B-plus.”
The actions parallel those taken last month by Moody’s Investors Service, which also moved NYDJ’s ratings deeper into non-investment territory.
“The downgrade reflects NYDJ’s weaker-than-expected operating performance in 2014, which has resulted in a deterioration of credit metrics and thin covenant cushion covenant levels…and our expectation that the company will be unable to meaningfully improve its operating performance and credit metrics over the next two years,” said S&P credit analyst Ryan Ghose. “Moreover, the company could breach covenants if it cannot reverse current performance as it faces step-downs later this year.”
In the S&P rating system, “BBB” is the lowest investment grade and “BB” the highest non-investment grade. Below “BB” is “B,” signifying that credit instruments are “more vulnerable to adverse business, financial and economic conditions” but that the issuer “currently has the capacity to meet financial commitments.”
Bob Skinner, president and chief executive officer of NYDJ, declined to comment on the S&P report but noted that, following the downgrade by Moody’s, he voiced optimism about the company’s short-term prospects.
“We’ve seen an improvement in the denim market and NYDJ’s business is trending positively, buoyed by seasonal color and new silhouettes,” he said in April. “We are encouraged by the consumer response to NYDJ’s newness,” including dresses using its patented Lift Tuck Technology, tops and its “athletic lounge” offering, known as NYDJ City/Sport.
The Moody’s report said revenues fell to about $166 million last year, down from about $200 million in 2013, when Crestview Partners and Maybrook Capital Partners acquired NYDJ.