Business News Legal

Guitar maker Gibson files for bankruptcy

By | Published on Wednesday 2 May 2018

Gibson

Guitar maker Gibson has filed for bankruptcy protection, following a lengthy struggle to control its debts.

As part of a restructuring programme, lenders have agreed to support the company with $135 million of financing. As it attempts to get out of bankruptcy, Gibson will re-focus on its core business of manufacturing musical instruments.

A significant portion of the company’s $500 million debt relates to the acquisition of the consumer electronics division of Philips – WOOX Innovations – in 2014. It paid $135 million for that business, as well as agreeing a brand licensing deal to continue using the Philips name.

At the time, Gibson CEO Henry Juszkiewicz said that that acquisition was “the most significant step yet in Gibson Brands’ journey to become the largest music and sound technology company in the world”.

That proved not to be the case and the company has since struggled to grow its audio and home electronics business. Having already announced that it would launch no new products this year, as part of the bankruptcy agreement Gibson will now wind down this division entirely.

As well as this, the company has faced increased costs of materials, particularly rosewood, for its instruments, and a global downturn in the sale of guitars.

In a statement yesterday, Juszkiewicz said: “Over the past twelve months, we have made substantial strides through an operational restructuring. 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”, he insisted. “All of whom can continue to rely on Gibson to provide unparalleled products and customer service”.

The company is aiming to exit bankruptcy protection on 24 Sep.



READ MORE ABOUT:

SIGN UP GO PREMIUM CMU NEWS CMU DAILY CMU DIGEST CMU TRENDS SETLIST