MARCH 13 I GUITAR CENTER I RATING ACTION
S&P Downgrades Guitar Center's Ratings
Standard & Poor's downgraded Guitar Center's corporate credit rating to CC from CCC-minus in a report released March 12. The ratings agency lowered Guitar Center's rating after the company announced refinancing transactions for its secured debt and an exchange offer for its unsecured notes. The outlook is negative.
"We consider the debt exchange offer to be a distressed transaction," S&P said in a report from primary credit analyst Samantha Stone. "The company plans to issue $635 million 9.5 percent senior secured notes due 2021, and use the proceeds along with cash to refinance the existing $615 million 6.5 percent senior secured notes, and the company is seeking to amend and extend the maturity of its ABL revolver by three years."
Concurrently, S&P assigned its preliminary CCC-plus issue-level rating and 3 recovery rating to Guitar Center's proposed $635 million 9.5 percent senior secured notes. The preliminary 3 recovery rating indicates S&P's expectation that lenders will receive meaningful recovery (50-70 percent; rounded estimate 60 percent) in the event of a payment default. The preliminary ratings are subject to S&P's review of final documentation and completion of the exchange offer and revolver maturity extension.
In addition, S&P placed the CCC-plus issue-level rating on the company's $375 million asset-based lending (ABL) revolver due April 2, 2019, on CreditWatch with positive implications.
The C issue-level rating and 6 recovery ratings on the company's $325 million 9.625 percent senior unsecured notes due April 15, 2020, are unchanged, according to the report.
|