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Gibson Guitars Files For Bankruptcy With Mountain Of Debt

The iconic Nashville-based company, whose guitars have been played by famous rock stars including Slash, Keith Richards, Jimmy Page, Alex Lifeson and Eddie Van Halen, has reached a Restructuring Support Agreement that will see lenders take control of Gibson Guitars.

Gibson Guitars made an ill-advised decision in 2014, leading to an inevitable conclusion.

Coupled with a steady industry decline in fretted instrument sales since the early 2000s, waning interest in guitar-based music among millennials, and growing discontent among its creditors over an unmanageable pile of debt, Gibson Guitars was left with little choice but to file for bankruptcy last week.

To implement the agreement, Gibson Guitars and its US subsidiaries filed pre-negotiated reorganization cases under Chapter 11 of the U.S. Bankruptcy Code.

Gibson Guitars made a disastrous acquisition of Philips’ consumer audio division four years ago having forked out $135 million for the deal. The audio division of the company will now be “wound down.”

According to court papers from the management consulting firm assisting the company, Gibson’s electronics business had been “trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales.”



Led Zeppelin guitarist, Jimmy Page, began playing Gibson Guitars in 1962.

Jimmy Page Has Been Playing Gibson Guitars Since 1962



Crucially, thanks to their agreement, Gibson’s Musical Instruments, and Professional Audio businesses will be able to carry on designing, building, selling and manufacturing Gibson guitars during its reorganization and bankruptcy proceedings.

Chairman and Chief Executive Officer of Gibson Brands, Henry Juszkiewicz, who bought the fabled company in 1986, said in a statement: “Over the past 12 months, we have made substantial strides through an operational restructuring.”

The company has at least $100 million of debt, and perhaps as much as $500 million, according to paperwork filed in Delaware last week.

But Gibson Guitars still has plans to get back on its feet.

It will liquidate its consumer electronics business, which sells headphones, speakers, and accessories while reorganizing its musical instruments and professional audio business, which has been more stable.

“Gibson Guitars will emerge from Chapter 11 with working capital financing, materially less debt, and a leaner and stronger musical instruments-focused platform,” the company said in a press release.

The Nashville-based guitar maker was founded in 1894. Its iconic Les Paul electric is one of the bestselling guitars of all time and has been used by famous musicians like Eric Clapton, Jimmy Page, and Pete Townshend.

The company has just under 900 employees, according to court documents.



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