MOODY’S HIKES SAKS DEBT RATINGS
NEW YORK — Saks Holdings Inc., the parent of Saks Fifth Avenue, had its debt ratings upgraded by Moody’s Investors Service, which cited the retailer’s improved underlying financial performance.
Saks’ $276 million convertible subordinated notes due in 2006 were raised to B1 from B2, and its $350 million revolving credit facility to Ba2 from Ba3.
The rating agency said it recognized Saks’ enhanced operating profitability as a result of both internal cost reductions and better operating leverage from higher sales. Moody’s said Saks can further increase the productivity of its traditional stores through remodeling programs and selective new store openings.
Moody’s said debt service coverage has improved as a result of lower relative debt and higher operating profit margins.
However, Moody’s said Saks’ rating “continues to reflect Saks’ high leverage, the concentration of sales in its New York flagship store, the trend of lower productivity in its Off Fifth outlet stores and the sensitivity of Saks’ revenues to changing fashion and economic cycles.”
The rating outlook is stable.