Fitch Initiates 'B-' IDR for Burlington Coat Factory; Outlook Stable.

NEW YORK -- Fitch has initiated rating coverage of Burlington Coat Factory Warehouse Corporation (BCF) as follows:

-- Issuer default rating (IDR) 'B-';

-- Proposed asset-based revolver 'BB-/Recovery Rating (RR1)';

-- Proposed term loan 'B-/RR4';

-- Proposed senior unsecured notes 'CCC/RR6';

-- Proposed senior subordinated notes 'CCC-/RR6'.

The Rating Outlook is Stable. These actions assume that the announced leveraged buyout (LBO) and associated debt issuances close under the announced terms. Approximately $2.1 billion of debt is covered by these actions.

On Jan. 18, 2006, BCF announced that it had entered into a definitive agreement to be acquired by Bain Capital Partners for approximately $2.1 billion, or $45.50 per share in cash. BCF's acquisition is to be completed utilizing new debt and an equity contribution of approximately $500 million, as well as cash on hand. Pricing for the transaction is approximately 7.5 times (x) latest 12 months ended Nov. 26, 2005 (LTM) operating EBITDA. The transaction, which has been approved by the BCF board is subject to shareholder approval. The shareholder meeting is to be held on April 10.

The ratings reflect BCF's recent positive sales trends as a discounter of apparel and home products, and its broad geographic reach. The ratings are also based on BCF's significant leverage pro forma for the LBO, intense competition in its product categories, and seasonality of its operations.

BCF has a broad geographic presence with 366 stores across 42 states, and has LTM revenues of $3.3 billion. The company has increased its number of stores and square footage at a reasonable pace, with a compound annual growth rate of 5% and 8%, respectively, over the last six years. The company's same store sales have been positive in fiscal 2005 and in the first nine months of fiscal 2006, and compare well with its closest competitor. Sales have benefited both from an increase in stores and same store sales performance.

However, the apparel and home products market is highly competitive with many different types of retailers, including discounters, department stores and specialty retailers, some of which are much bigger in size than the company. In addition, BCF's business is seasonal with the majority of sales occurring in the September-January timeframe. BCF also maintains a large inventory of merchandise, especially outerwear, subject to risks related to weather, fashion, and economic conditions.

Pro forma for the transaction, BCF's adjusted leverage, as defined by total adjusted debt to EBITDAR would have been 6.3 times (x) for the LTM ended Nov. 26, 2005. Liquidity is expected to be around $400 million, consisting primarily of any undrawn asset-based revolver. BCF will have adequate financial flexibility to meet its near-term capital requirements and debt service obligations.

The Recovery Ratings (RRs) and notching in the debt structure reflect Fitch's recovery expectations under a scenario in which distressed enterprise value is allocated to the various debt classes. The recovery ratings for the asset-based revolver ('RR1', reflecting expected 91%-100% recovery) benefit from substantial collateral of inventory and receivables, as well as any borrowing limitations due to borrowing base computation, which precludes the issuance of significant amounts of debt without sizable increases in assets. The term loan ('RR4', based on expected recovery of 31%-50%) reflects the expectation of average recovery prospects in a distressed case. The senior unsecured notes and senior subordinated notes ('RR6', based on expected recovery of 0%-10%) reflects the expectation of poor recovery prospects in a distressed case.

Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The ratings above have been initiated by Fitch as a service to investors. The issuer did not participate in the rating process other than through the medium of its public disclosure.