Moody's: Distressed exchange for Guitar Center

Moody's Investors Service said it affirmed Guitar Center, Inc.'s Caa2 corporate family rating and the Caa1 rating on its $622 million existing term loan due October 2014.

The probability of default rating was revised to Caa2/limited default from Caa2 while the speculative-grade liquidity assessment was changed to SGL-2 from SGL-3.

The outlook remains stable.

The ratings reflects a view that the extended deferral of interest on the holding company notes constitutes a distressed exchange, Moody's said.

The ratings continue to consider Guitar Center's unsustainable capital structure over the long term at current levels of operating performance, the agency said, given the sizable level of operating income growth needed to bring leverage and coverage to more reasonable levels.

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