Moody's: Totes view negative

Moody's Investors Service said it revised the outlook for Totes Isotoner Corp. to negative from stable and affirmed the B2 corporate family and probability-of-default ratings and Caa1 rating (LGD5, 81% from 80%) second-lien term loan. The agency upgraded the rating on its first-lien credit facility to B1 from B2.

The action is in response to the company's announcement that it acquired Northern Cap Holdings, Inc.

"Although the acquisition adds scale and broadens the company's product offering, the outlook change to negative reflects Moody's concern that the company is undertaking a debt-financed acquisition at a time when credit metrics are weak and the macro economic environment is challenging," Moody's analyst Michael Zuccaro said in a written statement.

"The company's leverage remains high, and in light of increased debt and covenant stepdowns, covenant cushion could tighten under these conditions," the analyst said.

Totes' B2 corporate family rating reflects the company's moderate scale and the commoditized nature of the categories in which the company operates, the agency said.

Ratings also reflect risks with high degree of seasonality and the potential impact of unfavorable climatic conditions on the company's sales, the agency said.

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