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S&P upgrades Guitar Center
S&P said it upgraded Guitar Center Inc.’s issuer rating to B- from D after emerging from bankruptcy.
“ Through bankruptcy, Guitar Center will have reduced its total debt obligations and interest expense substantially, though we still forecast leverage of above 5x over the next 12 months,” S&P said in a press release.
The agency also warned that the preferred equity with an aggressive 15% PIK interest could lead to the capital structure becoming unsustainable if performance is not in line with its forecasts. Certain pre-bankruptcy lenders hold the preferred equity.
The outlook is negative, reflecting a sales recovery complicated by the pandemic’s continued effects and the 15% preferred equity, S&P said.
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