Huntington Beach-based Quiksilver Inc.’s weak quarterly performance and reliance on short-term debt prompted Moody’s Corp. on Thursday to lower its rating on the clothing maker.
Moody’s downgraded Quiksilver’s overall credit rating and its probability of default rating deeper into junk bond status.
The agency said its outlook on the company is “negative” as it has $400 million in unsecured debt due in 2013 with a quarter of that debt coming due this year.
This is the second time Moody’s has downgraded Quiksilver’s stock in the past three months.
Quiksilver, best known for surf-inspired clothes, has been working on a turnaround since unloading its struggling Rossignol winter sports unit in a November fire sale.
Debt from 2005’s $560 million buy of Rossignol and more recent borrowing to keep the operation going still is weighing heavily on Quiksilver, which has seen its stock fall more than 80% in the past year to a recent market value of $215 million.
Last year, Quiksilver hired Morgan Stanely to help it raise money, possibly by expanding borrowing with existing lenders or by selling shares to investors or a private equity firm.
The company, which has $1 billion in short- and long-term debt as of Oct. 31, is working with its banks to amend its loan terms to help pay off debt while it weathers the deteriorating economy.
For the three months through October, Quiksilver reported a profit of $41.6 million, excluding a $55.4 million goodwill impairment charge for the recent quarter ended in October.
Quiksilver projects a loss of $12.7 million on a sales gain in the low single digits for the current quarter through January.
Analysts on average expect the company to report a profit of $2.5 million for the three months through January.
