S&P assigns Guitar Center notes B-

S&P said it assigned its B- preliminary issue-level rating to Guitar Center Inc.’s proposed $335 million senior secured notes issuance. The preliminary 3 recovery rating indicates an expectation for meaningful (50%-70%; rounded estimate 55%) recovery in default.

Guitar Center’s proposed bankruptcy exit financing will consist of a $375 million asset-based lending facility and the $335 million senior secured notes, maturing five years from emergence. Guitar Center will also issue $160 million of preferred equity with 15% payment-in-kind interest, given to the pre-bankruptcy lenders.

“The preliminary B- issue-level rating reflects our expectation that we would raise the issuer credit rating to B- with a negative outlook from D upon emergence from bankruptcy. We base this on our expectation for leverage post-emergence in the mid-6x area, improving to the mid-5x area by end of fiscal 2021 (the fiscal year ending Jan. 31, 2022). Through the restructuring, Guitar Center will have reduced total funded debt obligations by roughly half, and cut total interest expense to around $40 million from $140 million in fiscal 2019,” the agency said in a press release.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.