Moody’s cuts Guitar Center

Moody’s Investors Service said it downgraded Guitar Center Inc.’s corporate family rating to Caa3 from Caa2, probability of default rating to Caa3-PD from Caa2-PD and the senior unsecured notes rating to Ca from Caa3. Concurrently, Moody’s affirmed the Caa2 senior secured notes rating.

“The CFR, PDR and unsecured notes downgrades reflect the increased probability of a debt restructuring due to the capital markets disruption caused by the coronavirus outbreak, as well as expected significant earnings declines in 2020 due to temporary store closures and declines in discretionary consumer spending. In Moody’s view these factors, together with the company’s high leverage and approaching 2021 secured notes maturity, raise the company’s probability of default,” the agency said in a press release.

Moody’s said it affirmed the Caa2 senior secured notes rating because it sees a relatively good recovery for secured noteholders in an event of default, reflecting the company’s enterprise value and the loss abruption provided by the unsecured notes in the capital structure,” the agency said.

The outlook remains negative.

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