Faced with insurmountable debt, legendary guitar giant Gibson Brands filed for Chapter 11 bankruptcy protection, the company announced today.
The filing comes with a turnaround plan that will transfer equity ownership to its principal lenders, focus on its core musical instrument and pro audio businesses, and wind down its Gibson Innovations tech operation, which it acquired from Philips in 2014.
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, Gibson's CE business became "trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales," the Los Angeles Times reported.
Chinese TV manufacturer TCL acquired the global rights to the Onkyo brand from Gibson last month.
The ownership change will shift control from current stockholders including CEO Henry Juszkiewicz and president David Berryman to noteholders that include Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors, according to court filings obtained by Bloomberg.
In addition to the restructuring, Gibson will receive $135 million from the lenders to keep the company's instrument manufacturing division operational during the transition.
"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," said Juszkiewicz.
Juszkiewicz and Berryman will stay on post-bankruptcy "to facilitate a smooth transition during this change of control," the company said.
Hat tip to Guitar World.