Sun, 11/22/2020 – 19:25
On Saturday, the clock for Guitar Center, which began in 1959 as a store selling home organs in Hollywood, finally ran out when the company filed for Chapter 11 bankruptcy protection as music lovers moved their shopping online during the coronavirus pandemic.
As part of a pre-packaged bankruptcy filing the retailer negotiated to have a total of $375 million in debtor-in-possession financing from its existing lenders and announced its intention to raise $335 million in new senior secured notes, the company said in a statement.
The Plan is intended to allow Guitar Center and its related brands (including Music & Arts, Musician’s Friend, Woodwind Brasswind and AVDG) to continue to operate in the normal course while the transaction is implemented. As a result of the Plan, Guitar Center will continue to meet its financial obligations to vendors, suppliers, and employees, and intends to make payments in full to these parties without interruption in the ordinary course of business.
Ron Japinga, CEO of Guitar Center, said: “This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth. Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”
The filing followed an agreement with key stakeholders reached earlier this month according to which the company would see its debt cut by nearly $800 million alongside new equity investments of up to $165 million from its equity sponsor, a fund managed by the Private Equity Group of Ares Management Corporation, and new equity investors, which include a fund managed by The Carlyle Group and funds managed by Brigade Capital Management.
In its filing in the US Bankruptcy Court of the Eastern District of Virginia, the company said it has between $1 billion and $10 billion of both assets and liabilities. The company, which owns nearly 300 stores across the country, also said business operations will continue without any interruption.
Milbank LLP served as legal counsel, BRG served as restructuring advisor, and Houlihan Lokey was financial advisor to the company.
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Author: Tyler Durden