Moody's: Fender outlook negative

Moody's Investors Service said it affirmed Fender Musical Instruments Corp.'s B1 corporate family and probability-of-default ratings at B1, $200 million senior secured term loan at B2 (LGD4, 57% from 58%) and $100 million senior secured delayed draw term loan at B2 (LGD4, 57% from 58%).

The outlook was revised to negative from stable.

The negative outlook reflects the company's weakening credit metrics and concern that discretionary consumer spending will remain weak for musical instruments over the medium term, according to the agency.

"The negative outlook reflects Moody's expectation that a prolonged deterioration in discretionary consumer spending, including at KMC Music, Inc., which Fender acquired on Dec. 31, 2007, will challenge the company's overall operating performance and result in financial leverage higher than our previous expectations," Kevin Cassidy, senior credit officer at Moody's, said in a statement.

The B1 corporate family rating reflects the company's high leverage of close to 6x, negative revenue trends and deteriorating credit metrics, the agency said.

The B1 rating also reflects the company's strong brand name, geographic diversification, good liquidity profile and strong market share in the electric guitar segment, the agency noted.

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