S&P drops Eddie Bauer

Standard & Poor's said it lowered its rating on Eddie Bauer Holdings Inc., including the corporate credit rating, which it lowered to CCC from B-.

The outlook is negative.

"The downgrade reflects its concern that Eddie Bauer will breach financial covenants of its term loan in the first quarter of 2009 due to the tightening of covenants in its credit agreement," said S&P credit analyst Diane Shand, "and its expectations that profitability will decline at least through the first half of 2009."

The company has hired an outside advisor to explore possible modifications to its current debt terms, the agency said.

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