Guitar Center Could File for Bankruptcy Within the Next Month
Guitar Center, the largest musical instrument retailer in the United States, is facing a potential bankruptcy filing after missing an interest payment of roughly $45 million earlier this month, according to a New York Times report. The missed payment triggered a 30-day grace period that could end in default unless the company is able to satisfy its creditors.
Citing anonymous sources, the report claims that the company is discussing a plan with its creditors that would involve filing for bankruptcy this year and emerging from it in early 2021.
Guitar Center already missed an interest payment this year, in April, when it utilized a distressed debt exchange to avoid bankruptcy, resulting in a downgrade of its credit rating.
Despite a record-shattering year for the musical instruments industry with the quarantined masses driving instrument and gear purchases, Guitar Center has struggled, with most of its income from brick-and-mortar stores all but evaporated.
The company has been distressed for years, with reports on this website of such dating back to at least 2014. Bain Capital purchased the company in 2007 via a leveraged buyout, and Ares Management, its current owners, acquired a majority stake in 2014 by converting some of the debt owed into equity in the company. Before the pandemic hit, Guitar Center had shown signs of turning around on its $1.3 billion total debt owed, posting ten consecutive profitable quarters through February of this year.
It’s still possible that Guitar Center could avoid bankruptcy. We will keep you posted.