Gibson Brand Inc. has filed for bankruptcy with a turnaround plan that will, they hope, provide the company with a pathway to success. According to the Los Angeles Times, the turnaround plan will give some of the company's lenders equity ownership of the iconic American business, which has supplied guitars to Elvis Presley, Pete Townshend, and others.
The plan will help Gibson brand repay bank loans while going through a "change of control" transaction. The petition estimated up to $500 million in debt. Lenders have agreed to an operating — a "debtor in possession" — loan of up to $135 million to fund operations.
Gibson was founded in 1894 and sells more than 170,000 guitars annually in 80 countries worldwide. Its guitars are made in the United States with factories located in Nashville and Montana. It also sells studio monitors, headphones, turntables, and other musical instruments. Gibson guitars are considered to be some of the best made in the world.
It is not necessarily the quality of their products that have caused their financial woes. Rather, according to reports, the Gibson Innovation business, acquired in June 2014, is the primary source of its financial difficulties. Acquired through a leveraged transaction, the business faced sales declines due in part to a loss of credit insurance overseas.
According to Bloomberg, a change in control will give noteholders equity in a new company, "replacing current stockholders such as Chief Executive Officer Henry Juszkiewicz."
"The Gibson name is synonymous with quality and today’s actions will allow future generations to experience the unrivaled sound, design, and craftsmanship that our employees put into each Gibson product," Juszkiewicz said in a statement, according to Bloomberg.
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