Moody's rates Abercrombie & Fitch loan B1

Moody's Investors Service said it assigned a B1 corporate family rating, a B1-PD probability of default rating and an SGL-1 speculative grade liquidity rating to Abercrombie & Fitch Management Co., an indirect operating subsidiary of Abercrombie & Fitch Co., and a B1 (LGD3) rating to the company's proposed $325 million term loan due 2021. The outlook is positive.

Proceeds from the new term loan will be used to refinance the company's existing credit facilities, to add $125 million of cash to the balance sheet and for general corporate purposes, including potential share repurchases. The company is also expected to establish a new $400 million ABL revolver (unrated).

The agency said Abercrombie's B1 corporate family rating reflects its moderately high 4.25 times ratio of pro forma lease-adjusted debt to EBITDAR, compounded by its very high business risk as a niche retailer in the highly competitive teen apparel market.

The B1 rating also acknowledges, however, the company's very good liquidity, sizable market presence and meaningful diversification across geographies and distribution channels through its growing direct-to-consumer business with significant opportunities for growth, Moody’s said.

The positive outlook reflects Moody's expectation that the company will make meaningful progress in executing its strategy to return to profitable growth but acknowledges that these initiatives are still in the early stages.

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