Moody's assigns Gibson, loan B2

Moody's Investors Service said it assigned a B2 corporate family rating and B2-PD probability of default rating to Gibson Brands, Inc. A B2 was also give to the company's planned $250 million senior secured term loan due 2028.

“The company is best known for its legendary Les Paul style guitar. Gibson is a considerably smaller but more focused company than when it filed for bankruptcy in May 2018 having divested or closed the consumer electronics, piano, DJ equipment and juke box businesses as part of the reorganization plan. The company emerged from bankrtupcy emergence in November 2018 under KKR and other lender control and new management has improved operating performance,” the agency said in a press release.

“The B2 assigned to the term loan considers that it accounts for a significant majority of Gibson's pro forma capital structure. The term loan will have first-priority lien on the non-ABL priority assets, and a second-priority lien on the ABL-priority assets that include cash and cash equivalents, trade accounts receivable, inventories, intangible assets, and investments held by Gibson,” Moody’s said.

Proceeds will be used to pay a $225 million dividend to the owners including privately equity firm KKR, which owns about 70% of the company. The remainder will pay for fees and add $16.4 million to the balance sheet. Pro forma for transaction, Gibson will have a $250 term loan due 2028, a $50 million asset-based loan facility due 2025 and $64.8 million of cash on balance sheet. The ABL facility is not rated.

The outlook is stable.

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