Standard & Poor`s Corp. lowered its ratings Tuesday on Farley Inc., which remains strapped by heavy debt in connection with its buyout of West Point-Pepperell Inc. The agency also cut its debt ratings for several Farley-related companies.
”Farley Inc. remains in a strained position due to its heavy debt load and the general weakness of some of Farley`s operating units. Without new bank financing, or the ability to liquidate assets, it may be unable to meet its public debt interest payment due in August,” S&P said.
Farley officials were unavailable for comment, but Wall Street reacted. Stock of Fruit of the Loom Inc., another Farley unit whose rating was downgraded, closed down 37 cents at $12.
Farley`s subordinated debt rating fell to C from Triple C. Ratings on Fruit of the Loom`s senior debentures dropped to Triple C-minus from B-minus. The ratings on Fruit of the Loom`s notes fell to Double C from Triple C.
S&P noted that West Point Acquisition Corp., an entity Farley created that has been in default since April, remains in default. Although West Point- Pepperell, the operating company, has renegotiated its bank debt, it is not completely isolated from the problems at Acquisition.
S&P noted the bank debt of West Point-Pepperell has no provisions linking it to the Acquisition debt. Should Farley`s majority voting control be lost, the banks would have the ability to accelerate repayment of Acquisition debt. ”The inability of both Farley and (West Point) Acquisition to meet debt service requirements threatens the viability of the entire group of companies through possible bankruptcy filing,” S&P said.
