S&P upgrades Fender Musical Instruments

Standard & Poor’s said it raised its corporate credit rating on Fender Musical Instruments Corp. to B+ from B. The outlook is stable.

S&P also raised the rating on Fender’s senior secured term loan due 2019 to BB from BB-. The recovery rating is unchanged at 1, indicating the prospect of very high recovery (90% to 100%) in the event of a payment default.

“The upgrade reflects the company’s paying down $42 million on its term loan and revolver,” said S&P credit analyst Stephanie Harter in a news release.

“Although the company did not meet our forecast for EBITDA because of underperformance at its Japanese operations, and it incurred one-time charges associated with the closure of the KMC Music wholesale business and charges associated with its direct-to-market strategy in Japan, we believe the Japan disruption was a one-time event that should not continue to weigh on earnings. We expect normalized purchase patterns will resume in 2016.”

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