Moody's: Steinway outlook negative

Moody's Investors Service said it affirmed the debt ratings of Steinway Musical Instruments Inc. but revised the outlook to negative from stable.

The following ratings were affirmed: the senior implied rating at Ba3, the senior unsecured issuer rating at B1, and the $145 million 8.75% senior notes due 2011 at Ba3.

Moody's said the rating action follows Steinway's issuance of $29 million of additional subordinated notes in exchange for some of the equity of its largest institutional shareholder and reflects concerns regarding the company's financial policies, particularly given ongoing operating challenges and already meaningful debt levels.

The negative outlook recognizes that Steinway's debt levels and credit metrics are very poorly positioned relative to current rating levels and that the company's recent note issuance suggests a willingness to engage in more aggressive financial policies, which if continued would likely result in a ratings downgrade, the agency said.

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