Moody's upgrades Hanesbrands

Moody's Investors Service said it upgraded Hanesbrands, Inc.'s corporate family rating to Ba1 from Ba2, probability of default rating to Ba1-PD from Ba2-PD, $1.1 billion senior secured revolver due 2018 to Baa2 (LGD2, 18%) from Baa3 (LGD2, 17%) and $1 billion senior notes due 2020 to Ba2 (LGD5, 72%) from Ba3 (LGD5, 71%). The outlook is stable.

The agency said the upgrade reflects Hanesbrands' improved operating margins resulting from a combination of lower overall production costs and a modest increase in revenues. Combined, these two factors have had a meaningful, and what Moody's considers to be sustainable, favorable impact on the company's credit metrics. The ratio of debt to EBITDA is currently at 3.2 times, its strongest level since the 2006 spin-off by the company's former parent.

Hanesbrands' Ba1 corporate family rating reflects the company's significant scale in the global apparel industry, leading share in the innerwear product category and moderate financial leverage, the agency said.

Key concerns include Hanesbrands' significant customer concentration and its exposure to volatile input costs that can have a meaningful and unfavorable impact on earnings and cash flows, Moody's said.

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