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Moody's downgrades Quiksilver's credit ratings

Moody's downgrades
By Tiffany Montgomery
November 20, 2008 6:39 AM

Some tough news for Quiksilver this morning. Here's the Associated Press story about the company's credit rating being downgraded on weakening liquidity and other factors.

Moody's lowers Quiksilver ratings on debt levels

Thursday November 20, 9:00 am ET
Moody's cuts some Quiksilver ratings due to weakened liquidity, reliance on short-term debt

NEW YORK (AP) -- Moody's Investors Service on Wednesday lowered its ratings on outdoor apparel maker Quiksilver Inc., due to weakening liquidity and reliance on short-term debt following the sale of its Rossignol ski equipment business.

Last week, Quiksilver finalized the sale of its Rossignol to Chartreuse & Mont Blanc. It had been trying to sell the unit -- which had been incurring operating losses -- for much of the year.

Quiksilver received 30 million euros, or $37.5 million, for the unit.

Moody's said the company has weakened liquidity following the sale, and also received smaller-than-expected leverage from the sale.

While the deal was considered a positive since it was losing money, "Quiksilver funded the seasonal build in Rossignol's inventory through the date of sale, and the net cash sale proceeds (which were reduced in the revised final purchase price) were insufficient to retire the associated working capital debt," Moody's said in a statement.

Thus, the company continues to have a "significant" level of short-term debt in its capital structure, Moody's said.

Moody's downgraded the company's corporate family rating and probability of default rating two notches to "B2" -- a speculative or "junk bond" rating five notches below investment-grade status -- from "Ba3," which is three notches below investment-grade status.

Moody's also lowered the company's speculative grade liquidity rating to SGL-4, the lowest rating, from SGL-3.

All ratings -- except for the speculative-grade liquidity rating -- are on review for a further possible downgrade.


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