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S&P rates Fender loans B+, B-
Standard & Poor's said it assigned its B+ corporate credit rating to Fender Musical Instruments Inc.
At the same time, S&P assigned its B+ rating and a 3 recovery rating to Fender's proposed $220 million first-lien bank loan due 2012 and its B- rating and a 5 recovery rating to Fender's proposed $100 million second lien term loan due 2012.
The outlook is stable. Proceeds from the transaction will be used to fund a special dividend and pay a management bonus.
S&P said the ratings are based on Fender's high debt leverage, narrow business focus and discretionary nature of its products, somewhat mitigated by its strong market share and global brand names in the guitar segment, including Fender, Gretsch and Guild.
Total debt to EBITDA, adjusted for operating leases, is expected to be about 5.8x, and EBITDA coverage of interest expense at about 2.7x.
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