Gibson Files For Bankruptcy Protection

Discussion in 'The Backstage' started by JMon, May 1, 2018.

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  1. JMon

    JMon Senior Member

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  2. Donal

    Donal ¯\_(ツ)_/¯ Premium Member

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    What we have all been waiting for.

    https://www.bloomberg.com/news/arti...bankruptcy-with-deal-to-renew-guitar-business

    https://www.reuters.com/article/bri...eorganize-around-core-businesses-idUSASC09YH1

    * GIBSON BRANDS REACHES RESTRUCTURING SUPPORT AGREEMENT TO REORGANIZE AROUND CORE BUSINESSES

    * GIBSON BRANDS INC - TRANSACTIONS TO BE EFFECTUATED THROUGH PRE-NEGOTIATED CHAPTER 11 FILINGS


    * GIBSON BRANDS INC - SECURED $135 MILLION IN DEBTOR IN POSSESSION FINANCING


    * GIBSON BRANDS - REACHED “RESTRUCTURING SUPPORT AGREEMENT” WITH HOLDERS OF MORE THAN 69.0% IN PRINCIPAL AMOUNT OF 8.875% SENIOR SECURED NOTES DUE 2018

    * GIBSON BRANDS INC - GIBSON INNOVATIONS BUSINESS, WHICH IS LARGELY OUTSIDE OF U.S. AND INDEPENDENT OF MUSICAL INSTRUMENTS BUSINESS, WILL BE WOUND DOWN

    * GIBSON BRANDS - WIND-DOWN OF GI BUSINESS IS NOT EXPECTED TO IMPACT REORGANIZATION AROUND ITS CORE MUSICAL INSTRUMENTS/PRO AUDIO BUSINESS


    * GIBSON BRANDS - ALVAREZ AND MARSAL IS SERVING AS GIBSON’S CHIEF RESTRUCTURING OFFICER


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    Gibson Brands Inc. filed for bankruptcy with a turnaround plan that will give some of the company’s lenders equity ownership of the iconic American business that’s supplied guitars to B.B. King, Elvis Presley and Pete Townshend.

    A restructuring support agreement with senior secured noteholders will help it repay bank loans while going through a "change of control" transaction, according to papers filed Tuesday with its Chapter 11 bankruptcy in Delaware. The petition estimated up to $500 million in debt, and the lenders have agreed to an operating, or "debtor in possession," loan of up to $135 million to fund operations.



    The change in control will give noteholders equity in a new company, replacing current stockholders such as Chief Executive Officer Henry Juszkiewicz. According to court filings, current noteholders include Silver Point Capital, Melody Capital Partners LP, and funds affiliated with KKR Credit Advisors. The restructuring will also allow the instrument business to "unburden" itself of a consumer-electronics unit that Gibson blamed for its financial woes.

    Gibson, founded in 1894, sells over 170,000 guitars annually in 80 countries. Its guitars are U.S.-made, with factories in Nashville and Memphis, Tennessee, and Bozeman, Montana. It also sells studio monitors, headphones, turntables and other musical instruments.

    Its Gibson Innovations business, acquired in June 2014 from Koninklijke Philips NV, was the source of its financial woes, according to a court statement from Brian J. Fox, a managing director at Alvarez & Marsal who will serve as the company’s chief restructuring officer. Acquired through a leveraged transaction, the business faced significant sales declines due in part to a loss of credit insurance overseas.

    With the noteholder agreement, the iconic company has "an exit path from Chapter 11 as a deleveraged business, poised for continued growth," Fox said in the filing.

    Fox described the electronics business as having become "trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales." Cross-defaults had threatened the musical instruments business, and the company has been working with advisers since the fall of 2017 to try and solve the problem.

    Before the filing, Gibson reached an arrangement with major constituents to its musical instruments business, but not the consumer electronics business, Fox said.

    The case is Gibson Brands Inc., 18-11025, U.S. Bankruptcy Court, District of Delaware.
     
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  3. The General

    The General Senior Member

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    Not shocked.......
     
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  4. Donal

    Donal ¯\_(ツ)_/¯ Premium Member

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    At least Gibson guitars will get a second (or 4th) chance.

    The "plan" is, what we have always claimed, they should do.
     

  5. NYC LP player

    NYC LP player Premium Member

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    Just came out over the wire and my finance friend sent it to me

    Storied guitar maker Gibson Brands Inc. filed for bankruptcy protection Tuesday as the company has struggled with its debt load after a series of acquisitions. The company, which filed for chapter 11 in U.S. Bankruptcy Court in Delaware, said it will continue to operate during the proceedings as it focuses on reorganizing around its core businesses. Gibson plans to wind down its Gibson's Innovations business, which is largely outside of the U.S.

    "The decision to re-focus on our core business, musical instruments, combined with the significant support from our noteholders, we believe will assure the company's long-term stability and financial health," Chief Executive Henry Juszkiewicz said in prepared remarks. "Importantly, this process will be virtually invisible to customers."

    The Nashville-based maker of Gibson Les Paul guitars has been struggling with debt it took on to finance acquisitions of home-entertainment and audio-equipment makers years ago. Among businesses the company has added are some of Royal Phillips's home-entertainment systems, TEAC and Onkyo stereos.

    Gibson also makes instruments under a number of brand names including Dobro, Epiphone, Kramer and Tobias. The company also owns a number of historic brands, including Slingerland drums and Wurlitzer pianos.

    Gibson said it has reached an agreement with holders of more than 69% of its senior secured notes due in 2018 and shareholders that lets it continue to operate. The company also said existing noteholders have committed to provide $135 million in debtor-in-possession financing.

    The company said in the bankruptcy filing that it has debts of between $100 million and $500 million, including owing at least $100,000 to 26 other companies, including many suppliers.

    https://www.wsj.com/articles/guitar-maker-gibson-brands-files-for-bankruptcy-1525177170
     
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  6. Stuff

    Stuff Senior Member

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    Let's hope Henry gets removed as part of the restructuring, and that what emerges goes on to be a golden age for Gibson guitars.

    We can dream, right? :)
     

  7. Who

    Who I'm back. Back in the New York groove.

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    Not the first names you think of when you think "Gibson".

    Except B.B.


    I wonder what this means:
    Are you vultures going to be happy, now?



    This news is big enough, where it is the lead "Business News" story when I opened my browser moments ago:
    upload_2018-5-1_9-30-6.png
     
    Last edited: May 1, 2018

  8. Tone deaf

    Tone deaf Senior Member

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    This is actually great news, if you love Gibson guitars. Great news. It is the only way to shed the unrelated and unnecessary burdens (business units and related debt).

    Better than expected.
     
    indeedido, your idol, Who and 15 others like this.

  9. NYC LP player

    NYC LP player Premium Member

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    If Gibson has any sense of humor when they come back they will come out with a Strat with a Gibson headstock and call it a tribute to the PRS Silversky
     

  10. Tone deaf

    Tone deaf Senior Member

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    This is a textbook "Vulture capital" deal (i.e. acquisition executed by coming through the debt).

    What that means is that bankruptcy is the legal mechanism through which ownership is transferred from the current equity owners (HJ, et al) to the creditors. Additionally, there is too much debt to satisfy the full $500 million of face value. Therefore, the deal negotiated will have the senior debt guys taking ownership of the company in exchange for a big chunk of their debt (that is what KKR always wanted). That reduces the debt load on the company, when it comes out of BK protection.

    The timing is significant in that I am sure they did not make the interest payment that was due, yesterday. I am sure that was not a surprise to the debt holders. However, it would become public information pretty quickly (probably a 30-day cure period, but they aren't going to be curing it) and wanted to be out in front of the news cycle. They saved $32 million (in interest to the bonds) by pulling the ripcord now.
     

  11. Who

    Who I'm back. Back in the New York groove.

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    Thank you for that, Tone.
     

  12. emesem

    emesem Junior Member

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    I fear the "Golden Age" just ended
     

  13. Donal

    Donal ¯\_(ツ)_/¯ Premium Member

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    Exactly, it means Gibson will become a guitar making company again and all the other sh1t goes. I think it gives Gibson (guitars) a future.
     

  14. Pappy58

    Pappy58 Senior Member

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    Methinks 69% of secured debtor support will not get it done.
     
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  15. The General

    The General Senior Member

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    Thanks ToneDeaf, a wealth of knowledge as always.
     
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  16. Dilver

    Dilver Senior Member

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    "Known for providing instruments to stars such as Elvis Presley, BB King, Keith Richards, Pete Townsend and Lenny Kravitz, Gibson sells more than 170,000 guitars annually in more than 80 countries, according to a court filing."

    Maybe it's a statement from their PR agency, or head of corporate communications, or maybe its a reporter who knows nothing about music, but somehow they list Lenny Kravitz among BB, Keith and Pete? So many other Gibson users that are more well known that Lenny Kravitz. Isn't Slash their international spokesperson?
     

  17. HeartString

    HeartString Non Prominent MBR Premium Member

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    It's how Corporate America gets gov't attn and taxpayer money. It's all the rage.
     

  18. Howard2k

    Howard2k Premium Member

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    On the plus side - we'll continue to be able to buy new Gibson guitars. Not that I'm in the market.

    On the negative side - it'll kick off years of forum "nonsensary" about how pre-Chapter 11 Gibson's are both better and worse than the post-Chapter 11 Gibsons, largely based upon little more than the opinion of the poster and their ownership status of those instruments.
     

  19. Uncle Remus

    Uncle Remus Silver Supporter

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    To today's public even Pete and BB are not as well known as Lenny.
     
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  20. scott 351 wins

    scott 351 wins Senior Member

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    Who owns KKR? I hope it's not a Chinese company.....
     
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