Moody's upgrades Escada

Moody's Investors Service said it upgraded Escada AG's corporate family rating and the rating on its €200 million senior notes due 2012 to B1 from B2. The outlook is stable.

The upgrade reflects Moody's expectation of a generally positive market environment for luxury goods with sustained consumer and traveler spending, the company's improved credit metrics resulting from higher profitability and cash flow generation as the restructuring activities carried out by management have begun to deliver the expected benefits and the recent transition from a family-owned business to a management led company with the appointment of a new chief executive officer and chief financial officer.

Escada continues to benefit from a loyal and geographically diverse customer base and strong brand recognition supported by the high quality of its products, which the agency said should enable the company to take advantage of the currently positive trend in demand. Adjusted total debt to EBITDAR fell to 4.8x at the end of 2005 from 5.7x at the end of financial year 2004.

The company's profitability continues to be constrained, however, by the weak performance at some operating subsidiaries, the agency said. Moreover, the company remains exposed to currency movements in spite of its stringent hedging policy, as more than 60% of the Escada brand sales are in dollars and yen while the bulk of the company's costs and debt are in euros.

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