S&P rates Guitar Center notes CCC

Standard & Poor's said it assigned CCC ratings to the $375 million senior unsecured notes issued by Guitar Center Inc. and the $375 million senior unsecured pay-in-kind notes issued by parent Guitar Center Holdings Inc. The recovery rating is 6.

The outlook is negative. The B- corporate credit rating is affirmed.

S&P said the action follows the conversion of the company's bridge facility into permanent securities. The bridge facility was funded to facilitate the buyout of the company by Bain Capital Partners LLC in October 2007.

Ratings reflect the company's participation in the highly fragmented and competitive music products retail market, weaker-than-expected operating results at its Musician's Friend and Music & Arts divisions and a very highly leveraged capital structure that results in very weak cash flow protection measures, the agency said.

Pro forma total debt-to-EBITDA ratio grew to 9.4 times at March 31, from 9.1 times at the close of the transaction.

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