Moody's lowers Muzak

Moody's Investors Service said it downgraded Muzak Holdings, LLC's corporate family rating to Caa2 from Caa1, probability-of-default rating to Caa3 from Caa1, $25 million senior discount notes due 2010 to Ca (LGD5, 83%) from Caa3 (LGD6, 96%) and Muzak LLC's $115 million guaranteed senior subordinated notes due 2009 to Ca (LGD4, 66%) from Caa3 (LGD5, 86%).

Muzak LLC's $220 million guaranteed senior unsecured notes due 2009 were affirmed at Caa1, and the notes' loss-give-default assessment was revised to LGD2 (26%) from LGD3 (45%).

The outlook was revised to negative from developing.

The agency said the downgrade reflects Muzak's very high leverage, inadequate interest coverage and concerns over the economic pressure on its retail and restaurant customers.

The downgrade of the probability-of-default rating reflects Moody's concern over the company's ability to satisfy $437 million of debt maturing in the March 2009 quarter. Muzak plans to address these maturities as part of the proposed consolidation or combination with DMX, Inc. that is contingent on a sale of the entities to an as yet unidentified third-party buyer. The agency said there is still uncertainty over the viability of a sale transaction.

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