S&P cuts Tropical Sportswear ratings

Standard & Poor's said it lowered its corporate credit rating on apparel manufacturer Tropical Sportswear International Corp. to B- from B+, its subordinated debt to CCC from B- and lowered its senior secured debt rating on Tropical Sportswear's $95 million revolving bank credit facility due 2006 to B from BB-.

S&P said the downgrade reflects the company's poor financial performance and continued weak prospects for 2004, which have resulted in credit protection measures that are below S&P's expectations. Tropical Sportswear is expected to report a significant loss for fiscal 2003 after consolidating production facilities in its Savane division earlier this year, an initiative that led to lost revenues, compressed margins, and customer services/delivery issues.

The company experienced greater-than-expected sales returns and allowances after the consolidation, and heavy discounting on excess inventory, and this hurt the company's overall margins and operating profits.

The considerably weaker operating results and financial measures could lead to covenant compliance issues if availability under the company's revolving credit facility falls below a certain level, the agency said.

Further compounding the situation is the weak economy and challenging conditions in the retail apparel industry. Because of these issues, S&P said it expects Tropical Sportswear's credit ratios to remain weak in the near term.

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