Moody’s trims Ralph Lauren, rates notes A3

Moody’s Investors Service said it downgraded Ralph Lauren Corp.’s senior unsecured rating to A3 from A2 and also assigned an A3 rating to the company’s proposed $1.25 billion of senior unsecured notes.

The proceeds will be used for general corporate purposes, including the repayment of $475 million outstanding under the company’s unrated, unsecured credit facility and the repayment of its $300 million principal of 2.625% notes due Aug. 18.

“The downgrade reflects both the material increase in term debt and expected significant deterioration in operating performance as a result of the unprecedented disruptions caused by the global coronavirus pandemic,” said Mike Zuccaro, Moody’s apparel analyst, in a press release.

“The proposed transaction will enhance Ralph Lauren’s already excellent liquidity. The company had around $2.1 billion of cash and equivalents as of March 28, 2020. It also obtained financial covenant relief through June 2022 as part of a recent credit facility amendment, and has suspended share repurchases and dividends,” Zuccaro said.

The outlook remains negative.

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