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S&P ups Guitar Center
S&P said it raised its issue-level rating on Guitar Center Inc.’s senior unsecured notes to C from D following the results of its post-closing exchange offer. The 6 recovery rating remains unchanged, indicating an expectation for negligible (0%-10%; rounded estimate: 0%) recovery in a default scenario.
More than 83% of the debtholders participated in the company’s first exchange offer. About $63 million in senior unsecured debt was left. Guitar Center invited these holders to participate in a second round with the same terms as the first.
Under that transaction, which S&P viewed as a selective default, Guitar Center provided the noteholders with 107.75% of their exchanged principal in new senior unsecured notes and the consenting lender also forfeited the April 15 cash payment. On Monday, the company announced that 90.7% of its outstanding senior unsecured notes (roughly $56.4 million of $62.2 million) were exchanged under this offer, S&P said.
“Our CCC- issuer credit rating and negative outlook on Guitar Center remain unchanged and reflect our view that the company may pursue a restructuring or distressed exchange to address its capital structure in advance of its upcoming maturities,” S&P said in a press release.
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