S&P cuts Guitar Center loans, notes

Standard & Poor's said it lowered its corporate credit rating on Guitar Center Holdings Inc. to CCC+ from B-.

The outlook is negative.

At the same time, S&P lowered its issue-level rating on the company's $373 million ABL revolver to B from B+. The 1 recovery rating remains unchanged. The agency also lowered the issue-level rating on the company's $650 million term loan to CCC+ from B-. The 3 recovery rating is unchanged.

In addition, the ratings on Guitar Center Inc.'s $375 million senior unsecured notes and Guitar Center Holdings' $401,758,000 senior unsecured notes were lowered to CCC- from CCC. The 6 recovery ratings on these debt instruments remain unchanged.

"Our rating action reflects our view that the company's financial commitments are not sustainable in the long term given weaker than expected performance over the past two quarters," S&P credit analyst Mariola Borysiak said in a news release.

"It also reflects our view of the company's deteriorating liquidity position as we expect the company will have to borrow under its revolver to fund its operating and financing needs. In addition, we believe Guitar Center will have to amend its credit agreement within the next quarter in order to remain compliant with its financial covenants," Borysiak added in the release.

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