Guitar Center has filed for bankruptcy, a week after announcing an $800 million debt-reducing deal with its stakeholders.
The company announced yesterday (22 November) that it has negotiated a $375 million debtor-in-possession deal with its existing noteholders and ABL lenders, and has voluntarily filed for Chapter 11 in the Eastern District of Virginia. The filing ensures Guitar Center is able to continue operating its close to 300 stores while restructuring.
Ron Japinga, CEO of Guitar Center, said in a statement: “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.”
Last week, the retailer announced a deal with key stakeholders to cut $800 million in debt and inject $165 million in new equity investments to recapitalise the company. Among those involved are Guitar Center’s equity sponsor, Ares Management Corporation, and new equity investors, which include The Carlyle Group and Brigade Capital Management.
The company is also planning to raise a further $335 million in new senior secured notes.
In a court filing, Guitar Center said it has between $1 billion and $10 billion in both assets and liabilities.
Throughout the restructuring process, Guitar Center has promised to keep its stores open and maintain e-commerce operations. It will also continue to honour orders, warranties, credits, gift cards, deposits and so on.
“Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year,” Japinga said.
For more news on Guitar Center, click here.