Gibson, operator of Memphis guitar factory, files for bankruptcy protection

Adjust Comment Print

The maker of the Gibson guitar, omnipresent for decades on the American music stage, is filing for bankruptcy protection after wrestling for years with debt.

Support from senior secured noteholders will help Gibson repay bank loans while going through a "change of control" transaction, according to papers filed Tuesday with its Chapter 11 bankruptcy in Delaware.

The company has been struggling financially for many years and with many surplus divisions of the brand being closed down, especially the ill-fated "consumer electronics" division Gibson Innovations, so that it can concentrate on its core musical instrument range.

In a statement yesterday, Juszkiewicz said: "Over the past twelve months, we have made substantial strides through an operational restructuring".

Further, current noteholders include Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors. According to a court filing from the management consulting firm that will assist the company's pivot, Gibson's electronics business had been "trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales".

ChannelNews understands that companies that are owed over $500M have now taken control of the U.S. music Company. That business includes the brands KRK, Cerwin Vega and Stanton, whose lines include studio monitors, headphones and turntables.

ND Severe Summer Weather Awareness Week
The jet stream pattern will flip from what we've seen during this relatively quiet week and lead to the return of severe weather. Another round will bring an increased threat of severe weather, including tornadoes, to more heavily populated areas on Tuesday.

Gibson guitar sales have declined greatly and the company's cost cutting attempts have not been adequate to save the business. It will also be focusing on its core business, the iconic brands Gibson and Epiphone.

He also bought into Japanese company Onkyo whose products are distributed by Ambertech. But the purchases drained cash, and earnings plunged.

It was revealed that the organisation has debts of between $100 million and $500 million including owing sums of at least $100,000 to 26 other companies.

According to Bloomberg, the company's turnaround plan gives some of the company's lenders equity of ownership of the business.

"The Gibson name is synonymous with quality and today's actions will allow future generations to experience the unrivaled sound, design and craftsmanship that our employees put into each Gibson product", Juszkiewicz said.