Moody's lifts Unifi, rates notes Caa1

Moody's Investors Service said it assigned a Caa1 rating to Unifi Inc.'s proposed $225 million senior secured notes due 2014, raised the corporate family rating to B3 from Caa1 and affirmed the company's $250 million 6½% senior unsecured notes due 2008. The outlook is stable.

Proceeds from the proposed notes along with cash on hand will be used to prepay the existing 6½% notes. The company's $100 million senior secured revolving credit facility due Dec. 7, 2006 is also being refinanced through a proposed $100 million revolver due 2011.

The agency said that notwithstanding continuing industry overcapacity and pricing pressures across the textile industry resulting primarily from imports, these rating actions acknowledge Unifi's continued reduction in financial leverage since Moody's prior rating action in August 2004 and, also, the deleveraging impact of the proposed transaction itself.

The upgrade is further supported by operational improvements, the integration of the polyester filament manufacturing acquisition from Invista which took place in September 2004, the exit from the company's unprofitable manufacturing operations in the United Kingdom and Ireland and the company's promising investment in the Chinese market in the second half of 2005, Moody's said.

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