Iconic Guitar Maker Gibson Files for Bankruptcy With Turnaround Plan

Gibson Brands 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 more than 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.

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SOURCE: Bloomberg, Tiffany Kary