S&P downgrades Warner Music

Standard & Poor’s said it lowered the corporate credit rating on Warner Music Group Corp. to B from B+.

The outlook is stable.

The agency also said it lowered the rating on WMG Acquisition Corp.’s senior secured notes and term loan facility to B from B+. The 3 recovery rating is unchanged, indicating 50% to 70% expected default recovery.

S&P also said it lowered the rating on WMG Acquisition’s senior unsecured notes to B- from B. The 5 recovery rating is unchanged, indicating 10% to 30% expected default recovery.

The agency also said it lowered the rating on WMG Holdings Corp.’s senior unsecured notes to CCC+ from B-. The 6 recovery rating is unchanged, indicating 0 to 10% expected default recovery.

The downgrades reflect expectations that WMG’s adjusted leverage will remain elevated for the next two years at more than the 5x threshold for the B+ corporate credit rating, S&P said.

The company has committed to reducing leverage over time. However, the agency said it does not factor this into the rating analysis due to the lack of visibility regarding the pace of debt reduction.

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