Guitar Maker, Gibson, Could Be Facing Bankruptcy

Gibson guitar.

Iconic guitar-maker, Gibson, is reportedly facing bankruptcy.

Iconic guitar-maker, Gibson Brands Inc, may be facing bankruptcy in the near future. According to a recent report, the company, which has annual revenues of more than $1 billion, is less than six months away from $375 million of senior secured notes reaching maturity. Gibson also has another $145 million in bank loans that are due immediately if those senior secured notes are not refinanced by July 23.

Gibson’s chief financial officer, Bill Lawrence, left the company after a mere six months in the role. In addition to this, the guitar maker also moved out of its Nashville offices, from which it conducted its business since moving to the city from Kalamazoo, Michigan in the 1980s.

Gibson announced several days before the report that they have met all current obligations to the bondholders and is in the process of establishing a new credit facility to replace the bonds in the “ordinary course of business”.  In the statement, Gibson CEO, Henry Juszkiewicz, said that the bonds will expire as all fixed income instruments do at the end of their term. He notes that the company has been working with investment bank, Jeffries, to help with its current financial situation.

“While the musical instrument and pro audio segments have been profitable and growing, they are still below the level of success we saw several years ago,” Juszkiewicz said.

The company estimates that the new business strategy will allow Gibson to achieve better financial results within the next year, and allow them to pay back the company’s debt in the process.

According to Kevin Cassidy, a senior credit officer at Moody’s Investors Service, the guitar maker has little time to rebound from their poor sales. He expects Juszkiewicz to either negotiate an exchange of their debt for new notes, give up some of his equity in exchange for debt payments, or file for bankruptcy.

Several sources within the company said that Gibson has been struggling for the past several years as Juskiewicz is pursuing other sources of revenue, including electronic companies it has acquired.

Gibson’s Les Paul and SG guitars have been played by a plethora of renowned musicians, including Chuck Berry, B.B. King, Slash, Bob Marley, and Carlos Santana. The company was founded by Orville Gibson in 1902.

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