MAR. 2, 2020 I GUITAR CENTER I FINANCIAL
Moody's Downgrades Guitar Center's Ratings Outlook From Stable to Negative

Moody's Investors Service has downgraded Guitar Center's corporate family, probability-of-default and senior-secured-notes ratings from stable to negative.

The downgrades reflect the increased probability of a balance sheet restructuring as a result of Guitar Center's approaching 2021 maturities, high leverage and limited cash flow generation.

"While Guitar Center has reported modest growth in comparable sales and EBITDA [earnings before interest, tax, depreciation and amortization] over the past three years, and is a solid operator with a leading position in the niche musical instruments space, leverage remains high and cash flow is limited even after two distressed exchanges," said Raya Sokolyanska, Moody's vice president and lead analyst for Guitar Center.

According to Moody's analysts, Guitar Center must "continuously reinvest in its stores, technology, marketing and infrastructure."

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