S&P: Steinway outlook negative

Standard & Poor's said it revised its rating outlook on Steinway Musical Instruments Inc. to negative from stable and affirmed its BB- corporate credit rating and its B+ senior unsecured debt rating for the company.

S&P said the outlook revision follows Steinway's recent announcement that it has purchased 14% of its outstanding common stock and as payment for the shares issued $29 million of 8.75% senior notes due 2011 under its existing indenture. This unexpected increase in debt, along with the associated higher cash interest costs and the company's lower profitability in recent periods, will result in credit measures below S&P's expectations.

S&P said the ratings on Waltham, Mass.-based Steinway are based on the company's below-average financial profile, narrow product offering, and the discretionary nature of spending on musical instruments.

These factors are somewhat mitigated by Steinway's well-established market position in both the concert hall and institutional markets for musical instruments; its widely recognized brand names, including Conn, Selmer, and Steinway; and its geographic diversification in the United States, Europe, and Asia.

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