MOODY’S DOWNGRADES ITS RATING OF $75M IN PLAID GROUP BONDS
NEW YORK — The rating of a $75 million bond issue by Plaid Clothing Group has been downgraded to CAA with a negative outlook from Single-B2 by Moody’s Investors Service.
Plaid spent $15.2 million in a lengthy but fruitless pursuit of GFT SpA, an Italian manufacturer of designer apparel. In a filing with the Securities and Exchange Commission for the third quarter ended Oct. 1, Plaid noted that by yearend the firm would be in violation of its bank agreements. The quarter showed a loss of $10.5 million on sales of $76.3.
Plaid said the banks have requested new capital be injected into the company to cover a “substantial portion” of the after-tax GFT cost. Plaid added that while certain shareholders have indicated they would consider an additional investment, “there can be no assurance that the company will be successful in raising equity.”
In downgrading Plaid’s bond rating, Moody’s said the action was prompted by the weak market for men’s tailored clothing, a significant deterioration of the firm’s financial condition, growing inventory levels and weak liquidity. Moody’s noted that it expected little improvement in Plaid’s clothing sales in the near future.
On the positive side, Moody’s said the rating is supported by Plaid’s number two market position in men’s tailored clothing, its stable of brands and expected benefits from a restructuring program announced last year.
Plaid sold the $75 million in 11 percent subordinated notes through Goldman, Sachs & Co. in 1993. They rarely trade because only a handful of investors hold the entire issue. Recently, the notes were offered at 68 cents on the dollar, but there were no buyers, according to several bond traders.