Moody's: Steinway loans B1, Caa1

Moody's Investors Service said it assigned a B2 corporate family rating and B2-PD probability of default rating to Pianissimo Acquisition Corp. in connection with its proposed acquisition of Steinway Musical Instruments. A B1 (LGD3, 39%) rating was assigned to Pianissimo's proposed $190 million senior secured first-lien term loan, and a Caa1 (LGD5, 79%) rating was assigned to the company's proposed $100 million second-lien term loan. The outlook is stable.

Proceeds from the loans and a $225 million equity contribution by Paulson & Co., the equity sponsor and sole owner of Pianissimo, will be used to fund the acquisition.

The B2 corporate family rating reflects Steinway's high pro forma financial leverage of more than 6 times, the agency's view that leverage will remain above 5 times for at least the next few years, Steinway's relatively small scale in terms of revenue and narrow product offering and the inherent risks associated with being owned by a hedge fund, Moody's said.

Positive rating consideration is given to Steinway's strong brand recognition, the high quality of its products, its geographic diversification and its product diversification within musical instruments, the agency said.

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