Moody’s upgrades Kate Spade, loan to B1

Moody's Investors Service said it upgraded Kate Spade & Co.’s corporate family and probability of default ratings to B1 and B1-PD from B2 and B2-PD, respectively.

Concurrently, the agency upgraded the company's senior secured term loan rating to B1 from B2. The SGL-1 speculative grade liquidity rating was affirmed.

The outlook is stable.

Moody’s said the upgrade reflects Kate Spade's strong performance and improved credit metrics over the past year, including debt/EBITDA of 5.2 times and EBITA/interest expense of 2.3 times (Moody's adjusted, as of Jan. 3). The company's robust organic earnings growth in 2014 resulted from continued market share gains, the addition of new product categories and increased focus on the core business following the Lucky Brand and Juicy Couture divestitures.

Moody's expects the company to maintain positive earnings momentum in the near-term, supported by operating leverage in its international segment, same store sales growth, store openings and exiting the Kate Spade Saturday brand and Jack Spade stores.

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