As anticipated, Guitar Center, the most important musical-instrument retailer within the U.S. and a mecca for musicians, filed for chapter safety late Saturday evening, in line with the New York Occasions. The corporate, which missed a $45 million bond-interest fee final month, has round $1.3 billion in debt and has been deeply impacted by the coronavirus pandemic.
The corporate entered Chapter 11 restructuring proceedings within the U.S. Bankruptcy Court docket of the Jap District of Virginia, and mentioned in an announcement that it’s going to proceed to pay its distributors and workers in full. It mentioned it has reached an settlement with collectors on a plan that would cut back its debt by $800 million, and has secured new financing. These traders embrace its present proprietor, non-public fairness agency Ares Administration Company, together with funds managed by Brigade Capital Administration the Carlyle Group.
The corporate mentioned it expects to emerge from chapter by the top of the yr.
“This is a vital and optimistic step in our course of to considerably cut back our debt and improve our potential to reinvest in our enterprise to help long-term progress,” CEO Ron Japinga mentioned in a press release.
Whereas many musical-instrument retailers have seen robust on-line gross sales since lockdown started, Guitar Center lacked the e-commerce infrastructure to totally capitalize on these gross sales and has been outpaced by rivals corresponding to Sweetwater.
In 2014, Ares transformed its debt from Guitar Center into fairness possession and have become controlling shareholder. The Guitar Center generated about $2.3 billion in gross sales its most up-to-date fiscal yr, in line with Moody’s.
Guitar Center, based mostly Westlake Village, California, has round 300 shops throughout the U.S., together with 200 retailers for sister manufacturers. It lower spending and furloughed workers because the pandemic took maintain, and in April reached an settlement with bondholders to promote new notes and make good on debt funds it beforehand skipped, which prevented a default. The corporate started reopening its shops on a restricted foundation in July, and has additionally seen stable on-line purchases.