Published Nov 17, 2020Following troubling reports last month, Guitar Center has laid out plans to officially file for Chapter 11 bankruptcy protection.
Via a press release, Guitar Center — which calls itself "the world's largest musical instruments retailer" — confirmed it will file for bankruptcy protection following a debt-reduction deal with key investors. This will see the American chain try to reduce its debt by $800 million USD and "best position the company to return to its growth trajectory prior to COVID-19."
The restructuring support agreement, first announced on November 13, includes up to $165 million USD in new equity investments via a fund managed by the private equity group of Guitar Center's controlling owner Ares Management Corporation, as well as new investor Brigade Capital Management.
According to a New York Times report from late October, Guitar Center is a whopping $1.3 billion USD in debt.
Despite the restructuring, however, the press release states "all financial obligations to vendors, suppliers, and employees will continue to be paid in full in the normal course." This means, it's expected that retail locations will remain open in the U.S.
"Today we announced a very important and positive step forward to ensure the long-term financial strength of Guitar Center," CEO Ron Japinga said in a statement. "This agreement will allow us to significantly reduce our debt and reinvest in our business in order to better serve our customers and deliver on our mission of putting more music in the world. With ten consecutive quarters of growth prior to the impact from COVID-19, we have been pleased with our resilient financial performance during these challenging times created by the pandemic."
Guitar Center was founded in 1959 and now has 269 locations across the U.S., employing roughly 10,000.