S&P ups Steinway debt to BB-, rates notes BB-

Standard & Poor's said it raised Steinway Musical Instruments Inc.'s senior unsecured debt rating to BB- from B+, assigned a BB- rating to the company's planned $175 million senior unsecured note issue due 2014, affirmed its BB- corporate credit rating and revised the outlook to stable from negative.

The $175 million planned note offering will be used to refinance the company's existing senior unsecured notes.

The upgrade is based on S&P's expectation that Steinway's peak usage of its senior secured revolving credit facility will not significantly disadvantage senior unsecured debt holders, and the revised outlook reflects the company's improved leverage during the past two years. Total debt to EBITDA was 4.4x as of Sept. 30, compared with 5.2x in fiscal 2003. Leverage could improve to below 4x over the intermediate term if the company reduces debt and achieves benefits from its operating initiatives, the agency said.

The ratings on Steinway are based on the company's high leverage, narrow product offering and the discretionary nature of spending on musical instruments. S&P said 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 and its geographic diversification.

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