Fitch reaffirms Saks issuer default rating

AP News
Posted: Nov 25, 2009 1:10 PM

Fitch Ratings maintained the issuer default rating of Saks Inc. Wednesday and reaffirmed its outlook at negative.

The ratings agency kept the company's B-, or junk, issuer default rating and said the retailer's operating margins and free cash flow are under pressure due to ongoing softness in luxury retail sales.

The luxury sector has struggled during the recession as shoppers have limited their big-ticket purchases, instead seeking out low-priced items and deep discounts.

On Tuesday Saks extended the maturity date of its revolving credit facility, which has a borrowing capacity of $500 million, and changed certain terms of the loan. The company has taken other steps to strengthen its capital structure, including its issue of $120 million in convertible notes in May and a $100 million stock offering last month. Proceeds from those offerings were used to pay back debt under its revolving facility.

Shares of Saks added 26 cents, or 4.1 percent, to $6.67 in afternoon trading. Over the past year, the stock has traded in a range of $1.50 to $7.45.