Gibson Brands Inc., the well-known maker of Gibson guitars and Baldwin pianos, moved for a change of tune in DE bankruptcy court early Tuesday, opening a Chapter 11 reorganization that the company said will trim its $500 million debt while money-losing, nondebtor foreign affiliates liquidate.
But Gibson still has plans to get back on its feet. The company remains hopeful that they can re-emerge from bankruptcy intact, but with reported debts of between $100 million and $500 million on the books owed to numerous different creditors, it remains to be seen whether they will be able to pull it off.
The company was also affected negatively by import restrictions on rosewood, which is one of the main materials for several of Gibson's high-end guitars and instruments.
ChannelNews understands that companies that are owed over $500M have now taken control of the United States music Company.
The decision follows years of financial challenges facing the company, with the company owing much of that to its ill-fated "consumer electronics" division Gibson Innovations.
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Acquired through a leveraged transaction, the business faced significant sales declines due in part to a loss of credit insurance overseas. The company ran out of time for a turnaround as a bond maturity and springing term loan loomed in July.
The Chapter 11 proceedings will allow the company to continue manufacturing its products while the restructuring is in progress.
Working with Jefferies LLC, the company has over the past 12 months sought to sell or recapitalise the business this resulted in 58 businesses expressing an interest 27 signed non-disclosure agreements.
The Nashville-based guitar maker was founded in 1894. Its guitars are made in American factories, and it claims to have 40% of the market for electric guitars over $2,000. It also sells studio monitors, headphones, turntables and other musical instruments.
Gruhn, an expert on guitars of all kinds, said the company's bankruptcy was predictable after it expanded into the home electronics business. The aim of the plan is to "unburden" the company of its consumer electronics division and place its sole and original objective on providing the highest quality musical instruments.