Is Gibson Guitars Facing Bankruptcy Soon?
Gibson Guitars issued the following statement roughly a week ago:
“Gibson Brands, Inc. today announced that the company made a $16.6 million coupon payment to holders of its $375 million, 8.875% senior secured notes due 2018.”
If you’re like me, you probably read that and said, “Huh?” Thankfully The Nashville Post is here to cut through the clutter and tell us what’s what: the iconic guitar maker is in serious financial trouble.
The short version is this: Gibson has a shitload of debt to pay back, and they’ve got to do it soon. The company currently has $375 million of debt payments, first issued in 2013, that need to be made before July 23rd to avoid triggering another $145 million in bank loans that will come due immediately. On top of all of that, Blackstone extended Gibson a $130 loan about a year ago; in that context, the $16.6 million payment the company made (quoted above) is just a drop in the bucket. No wonder CFO Bill Lawrence just left the company after less than a year on the job.
What options does Gibson have going forward? The Post explains:
“Kevin Cassidy, a senior credit officer at Moody’s Investors Service, says Juszkiewicz [Gibson owner and CEO] essentially has just three options: He and his team could negotiate an exchange of their debt coming due for new notes, which may not be feasible at a reasonable price. He also could be persuaded — or forced — to give up some of his equity in exchange for the debt payments. Or he may end up taking one of the most globally recognized brands that calls Nashville home to bankruptcy court.”
“This year is critical and they are running out of time — rapidly,” said Cassidy, who last summer downgraded Gibson’s debt rating. “And if this ends in bankruptcy, he will give up the entire company.”
Gibson is a notoriously difficult company to work with, and Juszkiewicz often gets a bad rap. The company has taken a number of missteps in recent years, among them the installation of automatic tuners on its guitars which was met with universal criticism.
More on this story at The Nashville Post.
[via Ultimate Guitar]