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Gibson Files for Bankruptcy in Deal to Renew Guitar Business

  • Plans to ‘unburden’ itself of consumer-electronics business
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.



‘Exit Path’

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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Henry is getting the boot, great news!
Not just yet...

Juszkiewicz, who has found himself at odds with creditors in recent months, will continue with the company upon emergence from bankruptcy “to facilitate a smooth transition,” according to the agreement. Court papers call for a one-year consulting deal and compensation package for Juszkiewicz. A representative for the company didn’t immediately respond to questions about whether Juszkiewicz will remain as CEO or in a separate role.
 

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I was just about to post this.

I hope Henry is gone as soon as is practical.
 

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I was just about to post this.

I hope Henry is gone as soon as is practical.
He made some really dumb business decisions, but the main core of Gibson guitars have been pretty damn good in recent years. Even the 2015 guitars are good guitars, provided you like the options (I don’t prefer them).
 

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the shoe that didn't drop should KICK HENRY J IN THE ASS hard enough to leave a mark
 

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Henry is rampaging through head offices right now!

At first glance, I thought "Why is he smashing an SG?". But on second glance, I realized it was not a product from the Gibson-Epiphone stable. So, fair game.

I forget whether I posted it here or on another forum where this impending transition was being discussed, but there was an article published in the mid-1990's touting how Juszkiewicz and his business partner had brought Gibson back from the brink. The cruel irony is that everything and every practice they touted as responsible for the resurrection of the brand then (and which WAS responsible) is exactly what consumers and other critics say is clearly missing NOW. It's a strange thing how business thinking can drift over time, such that management eventually becomes antithetical to its own best interests.

Depending on what happens next, this can have some consequences for Gibson owners. A sharp drop in inattention to higher-end models and quality-control could mean that much older guitars (lets say early 70's and mid-90s) hacquire higher resale prices, due to association with some sort of "golden era", while instruments from later Norlin or more recent years get downgraded a bit in resale value, by virtue of being "tainted" by the company's reputation.

But that's idle speculati0n. Unless something is extremely rare, it's a bit of a fool's game to predict future selling prices. Hell, for all we know, there could even be such a thing as "the LAST Gibsons", whose prices skyrocket. Or, since there were some rumours flying of a Chinese buyer, "Chibsons" might acquire greater cachet (aye caramba!).

At the evry least, senior management at Gibson needs to have some sense smacked into them. There is a point at which compromising the sustainability of a long-standing business puts cultural heritage in jeopardy, not just dollars. I hereby volunteer to give him a sharp cuff about the ears.
 

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On second glance (third, actually), you might be right. The blurry letter-profile on the headstock didn't look like GIbson or Epiphone, but I hadn't considered the bargain-basement Maestro name.
 

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At first glance, I thought "Why is he smashing an SG?". But on second glance, I realized it was not a product from the Gibson-Epiphone stable. So, fair game.
It is from the Gibson family. It says Gibson on the truss rod cover.



At the evry least, senior management at Gibson needs to have some sense smacked into them.

It is not senior management or 'them', it is Henry. If you read anything about the company you will find that he micromanages and controls everything.

A former employee is a member at another forum and he described working in management there as being expected to pull a rabbit out of a hat on a daily basis while not being allowed to have either a rabbit or a hat.
 
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