Guitar Center, laden with debt, considers bankruptcy

After missing a $ 45 million bond interest payment earlier this month, the Guitar Center, the largest musical instrument retailer in the United States and a mecca for musicians, is evaluating its future, considering several restructuring options, including bankruptcy, according to reports in the New York Times and Bloomberg. Like many outlets, the Guitar Center, which debuts around $ 1.3 billion, has been deeply affected by the coronavirus pandemic.

The company is discussing debt recovery with its creditors, Bloomberg reports, citing sources familiar with the matter, who may see some holders take control of the company. It is also looking at alternatives similar to the refinancing deal it struck in the spring after some of its stores temporarily closed as the pandemic set in.

If the company chooses to file for bankruptcy, a likely restructuring plan would see creditors swap debt for equity in the reorganized company, the sources said, noting that nothing has been finalized yet.

In 2014, the private equity firm Ares Management converted its Guitar Center debt into an equity investment and became a majority shareholder. The Guitar Center generated approximately $ 2.3 billion in revenue in its most recent fiscal year, according to Moody’s. Guitar Center representatives did not immediately respond to Varietyrequests for comments from; a representative for Ares declined to comment.

This month, the Guitar Center missed interest payments on its obligations due in 2022 and 2021 and is operating under a 30-day grace period that expires in mid-November, according to the sources, who added that the abstention could be extended.

Guitar Center, based in Westlake Village, Calif., Has approximately 300 stores across the United States, as well as 200 outlets for sister brands. He cut spending and put employees on leave as the pandemic set in, and in April he struck a deal with bondholders to sell new tickets and pay off debts he had previously ignored, which avoided a default. The company began to reopen its stores on a limited basis in July and has also seen strong online shopping, one of the Bloomberg sources said.

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