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Dan River outlook lowered

Due to Dan River's high debt load and continued pressure from low-cost, off-shore competition, Standard & Poor's has revised the producer's outlook to "negative" from "stable."

At the same time, S&P affirmed the company's "B+" corporate credit rating and its "B-" senior unsecured debt rating.

S&P said the outlook "follows the company's disclosure in its recent 10-Q filing that, barring significant improvement in its current business activity, the company will likely violate credit facility covenants in the fourth quarter of 2003."

S&P analyst Jean Stout said Dan River's ratings "reflect the company's aggressively leveraged financial structure and very competitive and cyclical industry conditions. These factors are somewhat mitigated by the company's good position in both the home fashions business and the men's shirting fabrics market."

Home fashions, S&P said in a research note, "is a mature, highly competitive and cyclical industry, and participants such as Dan River currently face intense competition from lower-cost Asian imports."

A concern, said S&P, is the concentration of the company's business with a handful of customers. "Dan River also faces some customer concentration risk, as its top 10 customers account for about 55 percent of sales. Its largest, Kmart Corp., accounted for about 18 percent of 2002 sales. Although Kmart recently emerged from Chapter 11 bankruptcy protection in May 2003, Dan River's sales to the company may still be at risk. Furthermore, home furnishings sales are subject to discretionary spending, and Dan River's sales have been hurt by the weak economy and retail environment."

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