S&P downgrades Steinway

S&P said it lowered the corporate credit rating on Steinway Musical Instruments Inc. to B- from B.

The agency also said it lowered the rating on the company's existing $305 million first-lien term loan due 2019 to B- from B.

The recovery rating is unchanged at 3, indicating 50% to 70% expected default recovery.

The outlook is negative.

The downgrades reflect an opinion that operating performance will not materially improve until 2017, possibly leading to a near-term financial covenant default in the next three quarters, S&P said.

The negative outlook considers a view that Steinway will require covenant relief in the form of a credit agreement waiver or amendment or an equity cure in the next few quarters because of upcoming step-downs in the net total leverage covenant, the agency explained.

The ratings will be downgraded if business conditions weaken or the company's currently healthy levels of EBITDA interest cover fall below 2x, S&P said, or if liquidity becomes more constrained.

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