S&P rates Rafaella notes CCC

Standard & Poor's said it assigned its B- long-term corporate credit rating to Rafaella Apparel Group Inc. and assigned its CCC rating to the company's proposed $160 million second-lien notes due 2011.

Proceeds will be used to recapitalize the company in connection with Cerberus Capital Management LP's acquisition of a majority stake in the newly formed company, Rafaella Apparel Group Inc., the successor to privately held Rafaella Sportswear Inc. The transaction will involve a transfer of assets to the newly formed company.

The outlook is stable.

S&P said the ratings reflect Rafaella's participation in a highly competitive and very promotional retail environment, its relatively small size in the apparel industry (which is dominated by much larger players such as VF Corp., Liz Claiborne Inc, Jones Apparel group, etc.), its narrow product focus, and some customer concentration. The ratings also incorporate new senior management and its lack of track record with the company, and concerns regarding internal controls and financial reporting as outlined in the company's offering memorandum.

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