S&P affirms Rafaella Apparel

Standard & Poor's said that it affirmed its CC corporate credit rating on Rafaella Apparel Group Inc., along with the C issue-level rating on its senior secured notes due 2011. The recovery rating is 6, indicating an expectation of 0% to 10% recovery for note holders in the event of default.

The outlook is negative.

The action follows the recent expiration of the company's proposed modified Dutch auction tender offer, which did not meet the required minimum tender amount and consequently did not consummate, S&P said. The proposed credit agreement amendment did not close.

The ratings and outlook reflect concerns that Rafaella may have liquidity problems because the proposed tender offer and credit agreement did not close, S&P said.

The company's senior secured credit facility matures at the end of this year and senior secured notes are due 2011, the agency said.

The ratings also reflect its high leverage and small size in the competitive apparel industry, S&P added.

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