Creditflux Newsletter

Moody's yesterday raised its rating on iconic guitar manufacturer Gibson from Caa1 to B3, driven by the elimination of looming liquidity concerns.

Moody's has also assigned a stable outlook to the rating which reflects its increased confidence in Gibson's reporting processes as shown by the timely reporting of its 2010 quarterly financial statements. An improved operating performance by the firm as well as an enhanced liquidity profile with no debt maturities for five years also support the stable outlook.

Gibson's B3 rating is supported by its prominent market share in guitars, improving credit metrics, strong brand recognition, diversification within guitars and geographic diversification. Concerns remain over the company's corporate governance, however, while revenue was also volatile during the recession.