Guitar Center registers $979.45 million of 11½%, 14.09% PIK notes to be issued in exchange offer

By Angela McDaniels

Tacoma, Wash., Wash., July 1 - Guitar Center, Inc. registered $414,782,000 principal amount of 11½% senior notes due Oct. 15, 2017 with the Securities and Exchange Commission, and Guitar Center Holdings, Inc. registered $564,672,894 principal amount of 14.09% senior PIK notes due April 15, 2018.

The notes will be issued in an exchange offer for $375 million of 11½% senior notes and $564,672,894 of 14.09% senior PIK notes that were sold in a transaction not registered under the Securities Act. The new notes will be freely transferable

The old 11½% notes and old PIK notes were issued in August 2008 in exchange for Guitar Center's $375 million senior term loan and Guitar Center Holdings' $375 million term loan, respectively. The term loans were used to finance the 2007 acquisition of the company by Bain Capital Partners, LLC.

On March 2, the notes were amended and restated. Among other changes, the maturity date was extended to Oct. 15, 2017 for the 11½% notes and to April 15, 2018 for the PIK notes.

The company said all of the new 14.09% PIK notes and $375 million of the new 11½% notes will be issued in exchange for and in replacement of an equal amount of existing notes, and $39,782,000 of the 11½% notes may be issued in exchange for the assignment by the holders of the PIK notes of cash interest payments on the PIK notes to Guitar Center.

Before Oct. 15, 2013, the new notes are callable at par plus a make-whole premium. Beginning Oct. 15, 2013, the call price is par for the 11½% notes. The new PIK notes are callable at 101.7613 beginning Oct. 15, 2013, and this price steps down to par on Oct. 15, 2014.

The company will offer to buy back the notes at 101 if it experiences a change of control, and certain asset dispositions will trigger the requirement that it offer to buy back the notes at par.

The exchange offer has not begun yet. Bank of New York Mellon Trust Co., NA (212 815-5920) will be the exchange agent.

Guitar Center is a retailer of music products based in Westlake Village, Calif.

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