Guitar-Maker Gibson Brands Files for Bankruptcy

Guitarist Magazine via Getty Images

Guitarist Magazine via Getty Images

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. There is no official word on whether or not he will remain with the company following the transition. Gibson will wind down its consumer-electronics business.

It is estimated that Gibson Brands is facing up to $500 million in debt, with lenders agreeing to provide a short-term loan of up to $135 million to fund operations.

"Over the past 12 months, we have made substantial strides through an operational restructuring", said Henry Juszkiewicz.

Earlier this year Juszkiewicz blamed the company's financial struggles on retail outlets and it's employees for not being able to sell the guitars properly saying, "they see the trend, and that trend isn't taking them to a good place, and they're all wondering if there will be a world for brick and mortar stores for much longer".

Acquired through a leveraged transaction, the business faced significant sales declines due in part to a loss of credit insurance overseas.

Mr Juszkiewicz bought the audio and home entertainment business from Koninklijke Philips in June 2014 for $135 million as part of a bid to relaunch Gibson Guitars as Gibson Brands Inc., a 'music lifestyle company.

Gibson Innovations, based mainly outside of the USA, was purchased in order to facilitate a relaunching of Gibson from a guitar company to a "music lifestyle" company, according to Bloomberg. But the purchases drained cash, and earnings plunged.

Court papers call for a one-year consulting deal and compensation package for Juszkiewicz.

Gibson, founded in 1894 and based in Nashville, Tennessee, has the top market share in premium electric guitars. That business includes the brands KRK, Cerwin Vega and Stanton, whose lines include studio monitors, headphones and turntables.

It also makes the Epiphone and Wurlitzer pianos. All told, the music instruments business employs at least 875 people, according to court papers.

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