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Moody's places Quiksilver's rating on review for possible upgrade

June 17, 2010 6:42 AM

Source: Moody's

$400 million of rated debt affected

New York, June 16, 2010 -- Moody's Investors Service today placed Quiksilver Inc.'s ("Quiksilver") B3 Corporate Family Rating and Caa2 Senior Unsecured Note Rating on review for a possible upgrade. Moody's also affirmed the company's Speculative Grade Liquidity rating at SGL-3.

The review for possible upgrade reflects Quiksilver's announcement that it has entered into an agreement to exchange $75 million of outstanding principal amount of its senior secured term loans for newly issued common shares. Quiksilver also has an option, exercisable in its sole discretion, to require the lender to exchange up to an additional $65 million of the remaining outstanding principal amount of senior secured term loans for common stock. These transactions are subject to certain conditions, including but not limited to Quiksilver shareholder approval. The review for possible upgrade is also being undertaken in the context of recent improvement in Quiksilver's operating performance -- most notably its higher gross margins. These benefits are partially tempered by weak performance of the company's Roxy brand and sluggish performance in the Asia/Pacific region.

Moody's review will be focused on Quiksilver's ability to repay a significant portion of the secured term loan by concluding the exchange offer and/or from proceeds of alternative equity or equity-related financing. Repayment of the senior secured term loan with proceeds (via exchange or otherwise) from an equity offering would result in a material improvement in credit metrics.

The following ratings were placed on review for possible upgrade. LGD assessments are subject to change:

Corporate Family Rating at B3

Probability of Default Rating at B3

$400 million senior unsecured notes due 2015 at Caa2 (LGD 5, 80%)

The following rating was affirmed:

Speculative Grade Liquidity rating at SGL-3

Moody's last rating action on Quiksilver Inc. was on October 7, 2009 when the rating on its $400 million senior unsecured notes was lowered to Caa2 from Caa1.

The principal methodology used in rating Quiksilver Inc. was Moody's Global Apparel Rating Methodology published in May, 2010 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Quiksilver, Inc. is a designer and distributor of branded apparel, footwear, accessories, and related products under brands including Quiksilver, Roxy, and DC. The company generates annual revenue of about $1.9 billion.



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