Shares of Gap Inc. -- which have fallen by 56% in the past year -- dipped still further today as investors grew more skeptical about the future of the San Francisco-based retailer.

Following Gap's announcement Thursday that it had obtained a $1.3 billion secured bank facility, both Moody's and Standard & Poor's lowered Gap's credit rating to "junk" status.

Gap shares, which hit a 52-week high of about $35 last year, closed at $12.79 Thursday on the New York Stock Exchange and closed at $12.35 today, down 44 cents.

With 4,179 stores around the world, Gap is the biggest U.S. apparel chain and has been the mainstay of malls from coast to coast. The retailer also plays an anchor role at many centers.

In downgrading the retailer's credit, S&P analyst Diane Shand cited Gap’s recent record of disappointing sales and earnings amid a weak economy and difficult retail environment. "Management faces significant challenges in turning around the performance of each of its brands," Shand said. "No significant improvement in credit measures is likely to occur in the near term."

Early Thursday, Gap announced that it had received commitments from major commercial banks of approximately $1.3 billion toward a new 2-year secured bank facility.

The retailer said the facility would replace its existing $1.3 billion, 364-day bank facility, which expires in June 2002. It would also replace a $150 million facility expiring in June 2005.

The new facility, which is expected to close the week of March 4, "will be an important part of our overall financial planning strategies," John Lillie, Gap’s vice chairman, said in a statement.

"We are tightly managing our business by controlling variable expenses and reducing capital spending," Lillie said. "Our emphasis on cash management helps our brands focus on what's most important—improving comparable stores sales by delivering the right product and shopping environments to our customers."

Gap says its total debt stands at about $2 billion. The retailer expects to have more than $800 million in cash on hand and has also announced that it will reduce capital spending by about $600 million in 2002.

For more on this story, see The Gap Trap in SCW's February 2002 issue.

-- Staff and wire reports