| Stock price jumped on the sale ... and debt rating dropped (due to debt taken on)
Here's an analysis
Moody's Reviews Guitar Center Ratings
© 2007 The Associated Press
NEW YORK — Credit-ratings agency Moody's Investors Service on Wednesday placed Guitar Center Inc., the largest U.S. musical instrument retailer, on review for a possible downgrade.
The debt ratings review follows Guitar Center's announcement earlier Wednesday that it accepted a $1.9 billion cash buyout offer from private equity company Bain Capital Partners LLC. The deal also includes the assumption of $200 million in debt.
Moody's said it placed Guitar Center's corporate family rating of "Ba2," on review. "Ba2" is the second-highest junk-bond rating.
Moody's said the review is due to the likelihood the deal will be financed with debt, resulting in a significant increase in the company's leverage and a corresponding weakening in credit metrics.
Guitar Center Inc. shares soared $9.92, or 19.8 percent, to close at $59.98, after earlier rising to a 52-week high of $60.35.
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