S&P puts Rafaella on watch

Standard & Poor's said it placed the B corporate credit rating on Rafaella Apparel Group Inc. on CreditWatch with negative implications.

The watch follows the company's recent third-quarter results that show continued deterioration in credit protection measures as a result of significant contraction in its EBITDA base, according to the agency.

The agency said it is concerned about Rafaella's ability to maintain adequate cushion on the financial covenants for its revolving credit facility and about its dependence on Macys Inc. (BBB-/stable) and the department store channel, especially in light of the weakening industry trends and the soft retail environment.

For the 12 months ended March 31, leverage rose to 7 times from 5.4 times a year ago.

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