S&P upgrades Guitar Center

S&P said it raised its ratings for Guitar Center Inc. and its senior secured debt to B from B-. The debt’s 3 recovery rating remains unchanged, indicating expectations for meaningful (50%-70%; rounded estimate: 60%) recovery in default.

The company plans to issue $200 million of notes as an add-on to its 8˝% senior secured notes and use the proceeds to repay the borrowings on its asset-based lending facility.

“The upgrade reflects our view that Guitar Center's performance has rebounded from its weaker results in 2020. It also reflects our expectation that it will sustain the recent improvements in its EBITDA and leverage metrics in 2022. Guitar Center reported about a 40% increase in its revenue over the first three quarters of 2021 supported by a double-digit percent increase in the comparable store sales in its Guitar Center segment,” S&P said in a press release.

The outlook is stable.

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