Moody's affirms Rafaella

Moody's Investors Service said it affirmed Rafaella Apparel Group, Inc.'s corporate family and probability of default ratings at B1, its senior secured note rating at B2 and revised the company's outlook to negative from stable.

"The revision in Rafaella's outlook to negative reflects Moody's concerns regarding execution risk relating to strengthening the Rafaella brand, including increased investments related to branding initiatives, during a time where the macroeconomic environment remains challenging," said Scott Tuhy, Moody's vice president and senior analyst.

As a result of the May/Federated merger, Rafaella lost higher margin business with the previous May companies and has replaced it primarily with lower margin private label business, the agency said, noting that the affirmation of the B1 corporate family rating reflects the overall financial position of the company, including good free cash flow generation and liquidity position, replenishment nature of a large part of the Rafaella business, resulting in low seasonality and moderate free cash flow and leverage.

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