Moody's downgrades Fender

Moody's Investors Service said it downgraded Fender Musical Instrument's corporate family and probability-of-default ratings one notch to B2.

The company also has $200 million senior secured term loan at B2 (LGD4, 58% from 57%) and $100 million senior secured delayed draw term loan at B2 (LGD4, 58% from 57%).

The agency said that the action is due to operating performance and credit metrics that will remain below expectations of a B1 consumer durable company in the near to medium term.

The B2 rating on the senior secured term loan was affirmed.

The outlook was revised to stable from negative.

"Despite its ongoing debt reduction and cost rationalization efforts, we believe Fender's earnings and credit metrics will not return to their pre-recession levels in the foreseeable future," Kevin Cassidy, a senior credit officer at Moody's, said in a statement.

The B2 corporate family rating reflects the company's high-adjusted leverage of over 6.5x, negative revenue trends and generally modest credit metrics, according to the agency.

The rating also reflects Fender's relatively small size as well as the weak discretionary consumer spending environment, Moody's said.

The B2 rating also reflects the company's strong brand name, geographic diversification, good liquidity profile and strong market share, the agency noted.

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