Bloomberg News

BCBG Max Azria’s Loan Rises as S&P Says Bankruptcy Risk Lessens

June 22, 2012

BCBG Max Azria Group Inc.’s $230 million term loan climbed after Standard & Poor’s said the apparel retailer is more likely to receive a covenant amendment in the next six months than file for bankruptcy.

The debt due in June 2015 was quoted at 98.125 cents on the dollar yesterday, up from 97.9 cents on June 1 and as low as 93.1 cents on Jan. 27, according to information provider Markit Group Ltd.

S&P lowered BCBG one level to CCC, four steps above default, saying the Vernon, California-based company may have breached financial covenants in the fiscal 2011 fourth quarter after a “meaningful” decline in revenue during the year, the credit ratings company said yesterday in a report.

“We expect its revenue base and operating performance to stabilize somewhat in fiscal 2012,” Helena Song, a New York- based analyst at S&P, wrote in the report. “As a result, we believe that it is more likely for the company to receive a covenant amendment than to enter into bankruptcy in the next six months.”

BCBG’s revenue has “declined meaningfully” as the company tries to wind down its Miley & Max product line at Wal-Mart, Song said.

Comparable-store sales were in the “mid-single-digit area” in fiscal 2011 and were positive for the first four months of fiscal 2012, according to S&P. The ratings company expects comparable-store sales to remain in the low-single-digit range for the rest of this fiscal year.

“We are working with our lenders to modify covenants and our loan agreement,” Lalena Luba, BCBG’s vice president of public relations, said in a telephone interview. “Business is good and we have a positive outlook for the future.”

BCBG’s ratio of debt to earnings before interest, taxes, depreciation and amortization, or leverage, was 7.2 times as of April 30, according to S&P.

BCBG pays interest at 9.5 percentage points more than the London interbank offered rate on the loan, according to data compiled by Bloomberg. The retailer obtained the loan last June and proceeds were used to refinance debt, the data show.

To contact the reporter on this story: Krista Giovacco in New York at

To contact the editor responsible for this story: Faris Khan at

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