Moody's may cut Phillips-Van Heusen on Hilfiger deal

NEW YORK, March 15 (Reuters) - Moody's Investors Service on Monday said it may cut credit ratings on Phillips-Van Heusen (PVH.N) on concerns about the amount of debt the apparel company will take on to fund its acquisition of fashion brand Tommy Hilfiger.

Moody's rates New York-based Phillips-Van Heusen at Ba2, or two notches below investment grade.

The company said earlier it will buy Tommy Hilfiger from London-based Apax Partners [APAX.UL] in a cash and stock deal worth about $3 billion to boost its presence in Europe and Asia. For more click on [ID:nN15167494].

"This transaction will result in significantly increased scale for PVH and the combined firm will have much greater diversification by brand, distribution channel and product category," said Moody's analyst Scott Tuhy.

"However, a significant portion of the purchase price is being funded with debt, and leverage will increase with pro forma debt/EBITDA expected to be in the high 4 times range at closing," he said.

If the acquisition is completed on the current terms, the company's rating will likely be downgraded by one notch to Ba3, said the agency.

The deal value includes a cash component of $2.6 billion and $380 million in Phillips-Van Heusen common stock.

The company expects to use $3.05 billion debt, $385 million cash at hand, $200 million perpetual convertible preferred stock and $200 million from a common stock offering to finance the deal and refinance other debt.

Moody's said it will review integration plans for the Tommy Hilfiger business, the impact on credit metrics and expected operating synergies.

The agency also said that following the transaction, Phillips-Van Heusen's $100 million of senior unsecured debentures will remain outstanding and these will likely be downgraded to Ba2, two notches into junk territory, from Baa3, which is investment grade. (Reporting by Tom Ryan, additional reporting by Dhanya Skariachan; Editing by James Dalgleish)