Moody’s drops Cole Haan, loan to Caa1

Moody's Investors Service said it downgraded Calceus Acquisition Inc.'s (Cole Haan LLC) corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD and the rating on the senior secured first-lien term loan to Caa1 from B3.

The outlook is stable.

Moody’s said the downgrade reflects its expectations that ongoing industry wide weak apparel and footwear conditions particularly in the wholesale channel will make it challenging for Cole Haan to maintain its current level of operating performance, resulting in weak free cash flow generation relative to debt levels.

“Even though its direct-to-consumer business is growing, Cole Haan's cash flow generation underperformed its budget in the past two quarters and Moody's expects it to turn modestly negative going forward given the continued highly promotional environment and traffic decline across the apparel and footwear retail industry,” the agency said in a news release.

“Moody's expects this to result in higher revolver borrowings leaving the company with limited cushion to manage any further earnings deterioration.”

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