Gibson Takes Steps To Pay Off Debts, Attempts To Avoid BankruptcyGibson Brands Inc., one of the two most iconic guitar companies in music history, is facing bankruptcy after years of challenges
Down-but-not-out instrument maker Gibson is working on restructuring its debts in the hopes of putting reports of a looming bankruptcy to bed.
The iconic brand behind the Les Paul and SG, beloved by Pete Townshend, Jimmy Page, Neil Young and countless other guitar gods, recently announced that it is in the process of finding a new credit facility to replace $375 million of senior secured notes before they mature in six months. If those notes are not refinanced by July 23, another $145 million in bank loans will immediately become due.
In a statement, the Nashville-based company said it “fully expects the bonds to be refinanced in the ordinary course of business” and is “concluding a thorough strategic and budget planning process to identify those areas where it can maximize its investments, and pare back areas where investments have not been performing to expectation.”
Gibson, which has annual revenues of more than $1 billion, said that while its musical instruments and pro-audio division have been profitable, they are “still below the level of success we saw several years ago,” explained chairman and CEO Henry Juszkiewicz. The company also said it wants to streamline its Philips consumer audio brand to focus on brands with optimal growth potential.
As rock music has fallen from mainstream popularity so have the guitar sales that form the bulk of business for Gibson.
The company’s struggles may initially come as a surprise to observers who see vintage Gibsons selling for six figures on instrument sites — indeed, a 1960 Gibson Les Paul Standard could be yours today for a cool $595,000.
Yet the company sees little material benefit from the sale of second-hand items and its newer models have not been widely successful. Conversely, its main competitor, Fender, has kept itself above water by introducing budget lines in recent years, a move Gibson only recently embraced.
Insiders say the company, which was founded by Orville Gibson in 1902, has been struggling for several years under the leadership of Juskiewicz, who has been pursuing other revenue streams, including electronic companies it has purchased, as guitar sales have fallen over the past decade.
The company has been synonymous with rock and roll since the 1950s with its models. The most popular include the Les Paul, the SG, the Firebird and several semi-acoustic lines.
Gibson Les Paul guitars have been in the hands of virtually every iconic guitar hero, from Chuck Berry and B.B. King to Jimmy Page and Eric Clapton and Duane Allman to Slash and Johnny Marr to Gary Clarke Jr. Yet as rock music has fallen from mainstream popularity so have the guitar sales that form the bulk of Gibson’s business.
Gibson said it expects the strategy will lead to the best financial results in its 124-year history and an ability to “pay back the company’s debt in whole within several years.”
What would rock be like without Jimmy Page playing his 1959 Gibson Les Paul Sunburst Standard?