S&P downgrades Guitar Center

S&P said it lowered its corporate credit rating on Guitar Center Holdings Inc. to CCC- from CCC+.

The outlook is negative.

At the same time, the agency assigned a CCC- corporate credit rating and negative outlook to operating subsidiary, Guitar Center Inc.

In addition, S&P lowered the issue-level rating on the company's $375 million asset-based lending revolver due April 2, 2019 to CCC+ from B. The 1 recovery rating remains, indicating an expectation of strong (90%-100%; rounded estimate: 95%) recovery in the event of a payment default.

Concurrently, the agency lowered the issue-level rating on the company's $615 million 6½% senior secured notes due April 15, 2019 to CCC- from CCC+. The 3 recovery rating is unchanged, indicating an expectation of meaningful (50%-70%; rounded estimate: 65%) recovery.

S&P also lowered the issue-level rating on the company's $325 million 9 5/8% senior unsecured notes due April 15, 2020 to C from CCC-. The recovery rating remains at 6, reflecting an expectation for negligible (0%-10%; rounded estimate: 0%) recovery.

“The downgrade reflects our view that Guitar Center could likely execute a debt exchange offer within the next six months for its senior secured and unsecured notes,” the agency said in a news release.

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