Parent Company of Conn-Selmer downgraded

Moody's has downgraded the bond status and probability of default of Conn-Selmer's parent company, Steinway which is privately owned by Paulson & Co.   Read a report here at Bankrupt Company News.

Moody’s believes that unless the Company’s operating performance significantly improves, there is a risk that leverage will remain above 7 times as the Company attempts to refinance its ABL revolving credit facility and its $300 million term loan. “We think that the company will need to seek covenant relief again as it did in September 2016,” noted Cassidy. “This could come through another equity cure by its owner, Paulson & Co. Inc., or a covenant amendment.”

In layman's language, this means that Moody's believes that the company will not be able to significantly reduce its debt.  In order to 'relieve' the debt burden either the parent company will have to kick in more cash or they may have to seek other relief such as protection from their creditors, i.e. bankruptcy protection.

And what this all means at the bottom of it is that the company cannot grow by taking on debt.  It may even be possible that it cannot operate at its current level without taking on debt. This spells trouble for the iconic brands that Steinway owns. The company could piece off more profitable divisions (Conn-Selmer is historically one of these) in order to prop up the less profitable divisions, which is likely Steinway pianos. I say all this in terms of probability because since the company went private we no longer get public reports that indicate which divisions are money makers are which are losers (if any).

So, a sale of Conn-Selmer would not be an unexpected turn of events in this situation, especially because it seems the owner has already injected cash into the company at least once since the purchase.