Gibson files for Chapter 11 bankruptcy – ‘reorganisation’ on the way
Gibson Brands has filed for Chapter 11 bankruptcy in the USA but has secured $135 million in ‘Debtor in Possession Financing’, which will allow the company to remain in business, concentrating on its core operations while it reorganises.
The agreement, which leaves many questions unanswered, means that Gibson has reached a ‘Restructuring Support Agreement’ with holders of more than 69.0% in principal amount of its 8.875% Senior Secured Notes due 2018, and its principal shareholders: ‘…that clears the pathway for the continued financing and operations of the musical instruments business as well as a change of control in favor of those noteholders,’ the company says in a statement.
The long term futures of controversial Chairman and CEO, Henry Juszkiewicz, and his business partner and Gibson president, Dave Berryman, are not made clear in the statement, which says: ‘Henry Juszkiewicz, Chairman and Chief Executive Officer of Gibson Brands, and David Berryman, Gibson’s President, will each continue with the Company upon emergence from Chapter 11 to facilitate a smooth transition during this change of control transaction and to support the Company in realizing future value from its core business’.
Similarly, the future of some of Gibson’s acquisitions, notably Tascam, is not spelled out. Gibson says: ‘The filings will allow the Company’s Musical Instruments and Professional Audio businesses to continue to design, build, sell, and manufacture legendary Gibson and Epiphone guitars, as well as KRK and Cerwin Vega studio monitors and loud speakers, without interruption. The Restructuring Support Agreement provides funding for the musical instrument and professional audio businesses, supports the Company’s key vendors, shippers and suppliers, and provides for the restructuring of the Company’s balance sheet. Gibson will emerge from Chapter 11 with working capital financing, materially less debt, and a leaner and stronger musical instruments-focused platform that will allow the Company and all of its employees, vendors, customers and other critical stakeholders to succeed’. No mention is made of the future for Tascam, Onkyo or the Phillips brand.
‘Over the past 12 months, we have made substantial strides through an operational restructuring,’ said Mr. Juszkiewicz. ‘We have sold non-core brands, increased earnings, and reduced working capital demands. 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.
‘Importantly, this process will be virtually invisible to customers, all of whom can continue to rely on Gibson to provide unparalleled products and customer service.
‘We are grateful for the continued support from our employees, customers, dealers, partners and suppliers as we move through the restructuring process,” said Mr. Juszkiewicz. “The Gibson name is synonymous with quality and today’s actions will allow future generations to experience the unrivaled sound, design and craftsmanship that our employees put into each Gibson product.’
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