Moody's upgrades Gibson loans

Moody's Investors Service said it revised Gibson Guitar Corp.'s outlook to stable from positive, upgraded its senior secured term loan and revolving credit facility to Ba3 (LGD2, 23%) from B2 (LGD3, 44%) and affirmed its B2 corporate family rating and B2-PD probability of default rating.

The outlook change is due to an increase in leverage following the recent TEAC investment - the pro forma debt-to-EBITDA ratio is about 5.5 times - and Moody's view that the company will not be able to achieve and maintain the 4.0 times leverage target, one of the primary conditions required for a higher rating. The change in outlook also considers that most of the revolver borrowings used to fund the Stanton and Onkyo acquisitions over a year ago remain outstanding, the agency added.

The upgrade of the credit facilities reflects the additional loss absorption provided by the roughly $60 million of junior debt (not rated) issued to acquire TEAC, Moody's said.

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