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Byline: CATHERINE M. CURAN
NEW YORK -- Moody's Investors Service raised its rating of Guess Inc.'s senior subordinated notes to B1 from B2, affecting about $130 million of debt securities.
Moody's said the upgrade is based on the privately held company's continued strong operating results, good interest coverage, strong cash flow and its position as a leading provider of high-quality denim products. However, the rating agency continued, the new rating also recognizes the manufacturer's weak balance sheet as a result of last year's recapitalization, which included historically high levels of cash distribution to shareholders. The rating agency also cited the fashion risk of the company's largely "image-driven products" in a highly competitive environment and the heavy reliance on the company's three top executives who are also founders and its sole shareholders -- Maurice Marciano, chairman and chief executive officer; Paul Marciano, president, and Armand Marciano, senior executive vice president. A fourth brother, Georges Marciano, who was ceo, left the firm last year, selling his holdings to his brothers.
In a telephone interview from his Los Angeles office, Paul Marciano said, "Our financial position in 1994 has dramatically increased, mainly through international licensing revenues and department store performance." This performance was particularly strong in basics, surpassing expectations, he said.
Marciano said revenues from licenses in the United States and abroad are up 46 percent from last year. He also said the company opened a distribution office in Hong Kong to serve customers in Australia, Singapore, Hong Kong and Malaysia.
-- Fairchild News Service