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Non-Tech : DESIGNER HOLDINGS

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To: HARRY SINGH who wrote ()	8/8/1997 12:46:00 PM
From: Michael Berkowitz	of 86

Thursday August 7 6:23 PM EDT Moody's cuts Designer Holdings unit rating NEW YORK, Aug 7 - Moody's Investors Service confirmed the ``b2'' preferred stock rating of Designer Finance Trust, a special service subsidiary of Designer Holdings Ltd. Moody's also downgraded the prospective rating on Designer Holdings' new $150 million secured bank agreement to (P)Ba3 from (P)Ba2. The rating outlook remains negative. The rating actions follow the news that the company expects sales and markups of CK Jeanswear to fall based on oversupply relative to the current demand outlook. This follows March's announcement that the company was cutting back on distribution to specialty stores in order to focus on higher-margin department store sales. The company also announced it is considering some buybacks of common stock later this year. Designer Holdings continues to have cash balances in excess of $60 million and no outstandings under its revolving credit. Moody's expects cash will go up by fiscal year end as it liquidates inventory through its wholly-owned Calvin Klein outlet stores and its customer network. The downgrade in the proposed rating of the secured bank facility reflects the negative effect on collateral value resulting from the market outlook for denim and lack of diversification. The company has been searching for additional franchises since cancellation of the Donna Karan agreement in early 1997. Calvin Klein Jeans appears to be maintaining its share of the designer jeans market even as aggressive names such as Polo and Hilfiger have broadened their presence. However, product margins and growth are likely suffer as the market matures. Moody's believes the company may have some opportunity to reduce the cost of sourcing product in future years. The Calvin Klein Outlet Stores, purchased in late 1996, will provide a source of revenue growth as well as an in-house outlet for some product. Designer Holdings, headquartered in New York City, designs, sources and sells casual clothing in the U.S. The company is the licensee for Calvin Klein Jeans and Calvin Klein Khakis.

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