Despite creating instruments used by some of the greatest legends in music, the company has been in debt, and steadily declining, for the last number of years.
Support from senior secured noteholders will help Gibson repay bank loans while going through a "change of control" transaction, according to papers filed Tuesday with its Chapter 11 bankruptcy in Delaware.
The bankruptcy petition shows the company has up to $500 million in debt. According to court filings, current noteholders include Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors.
Various factors may be affecting the shrinking electric guitar market.
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. It also manufacturers other musical equipment, including amps, turntables and more.
Among the more memorable in recent history are Angus Young of Australian rock band AC/DC, who plays a white Gibson SG guitar, echoed in the 2003 film School of Rock in which Jack Black also touts a Gibson SG. However, in addition to the largely negative reaction to the move from Gibson's core customers-actual musicians-the purchases burned through capital and the saw lukewarm consumer response. The hope is that a more nimble, reorganized company will be able to address its problems and return focus to the core guitar business.
In response to our earlier report pointing to imminent bankruptcy, Gibson CEO Henry Juszkiewicz insisted that loan obligations were being met.
The company, which filed for chapter 11 in U.S. Bankruptcy Court in DE, said it will continue to operate during the proceedings as it focuses on reorganizing around its core businesses. Today, the company made it official.
While filing for bankruptcy is hardly on any business's bucket list, this restructuring deal seems to be a best-case scenario for Gibson's customers.
That being said, the Gibson name might be their most valuable asset, which Juszkiewicz, who own's a sizable share of the company also realizes.