Gibson Guitars Has Officially Filed for Bankruptcy
It shouldn’t come as a shock that Gibson filed chapter 11 for bankruptcy today. We’ve been hearing rumblings that they might do so since at least February, while in March, bondholders claiming to control over two-thirds of the company declared that they would not be investing any more money into Gibson until CEO Henry Juszkiewicz was fired (in other words, they had no faith in his plan to keep the company afloat). Still, there’s something unsettling about such a storied institution falling on such hard times; it’s like hearing that The New York Times or Coca-Cola filed for bankruptcy.
Not that bankruptcy means the end (just ask our sitting president). According to Variety…
“[T]the company has reached a restructuring support agreement with holders of more than 69.0% in principal amount of its 8.875% Senior Secured Notes due 2018, and its principal shareholders, that clears the pathway for the continued financing and operations of the musical instruments business as well as a change of control in favor of those noteholders. The petition estimated up to $500 million in debt, according to Bloomberg, and the lenders have agreed to an operating, or ‘debtor in possession,’ loan of up to $135 million to fund operations.”
Noteholders including Silver Point Capital, Melody Capital Partners LP, and funds affiliated with KKR Credit Advisors will now be given equity in a new company, supplanting Juszkiewicz, who owns 36% of Gibson. Meanwhile, Juszkiewicz and company president David Berryman “will continue with the company upon emergence from Chapter 11 ‘to facilitate a smooth transition during this change of control transaction and to support the Company in realizing future value from its core business.’” The company’s electronics division, Gibson Innovations, is dunzo.
Here’s a statement from Juszkiewicz…
“Over the past 12 months, we have made substantial strides through an operational restructuring. We have sold non-core brands, increased earnings, and reduced working capital demands. The decision to re-focus on our core business, Musical Instruments, combined with the significant support from our noteholders, we believe will assure the company’s long-term stability and financial health.
“Importantly, this process will be virtually invisible to customers, all of whom can continue to rely on Gibson to provide unparalleled products and customer service.”
…and here’s a statement from Gibson as an entity:
“Gibson will emerge from Chapter 11 with working capital financing, materially less debt, and a leaner and stronger musical instruments-focused platform that will allow the Company and all of its employees, vendors, customers and other critical stakeholders to succeed.”
As Juszkiewicz says, the impact to Gibson’s customers and business partners will be minimal; this news doesn’t mean you need to run out and buy that Les Paul you’ve always wanted because soon they won’t make ’em anymore. It mostly means that everyone at Fender is enjoying a glass of champagne today. Hopefully the new boss does a better job with the company than the old boss.
[via Metal Insider]