Guitar Center creditors oppose the retail giant’s bankruptcy plan
Certain creditors have banded together to oppose the retailer’s bankruptcy plans ahead of a critical deadline next week.
Image: Kristoffer Tripplaar / Alamy
Several creditors of Guitar Center have organised with the intention of voting against the retail giant’s bankruptcy plan next week, ahead of a critical deadline.
Guitar Center, on 22 November, announced it had negotiated a $375million debtor-in-possession deal with its existing noteholders and ABL lenders. Per Bloomberg, however, some first-lien noteholders are now questioning the legitimacy of a prior refinancing deal, announced back in July.
Those creditors claimed that the deal in November gave priority over collateral already pledged to existing first-lien notes; they further argued that Guitar Center needed permission from each first-lien noteholder in order to approve its new pledge, as opposed to the authorisation of a majority.
The creditor group makes up roughly 20% of Guitar Center’s first-lien notes. They are now pushing back against a restructuring plan supported by over 70% of the retail giant’s noteholders, according to Guitar Center’s disclosures.
The retail giant’s creditors will have until 10 December to comply or object to the current bankruptcy plan. A hearing is planned for 17 December, where a judge will have the final say on whether objections bear enough weight to uproot the current plan.
On 22 November, Guitar Center filed for Chapter 11 bankruptcy in the Eastern District of Virginia. The filing came hot on the heels of an $800 million debt-reducing deal with its stakeholders. The filing allowed Guitar Center to continue operating its close to 300 stores while restructuring.
Ron Japinga, CEO of Guitar Center, said in a statement at the time: “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.”
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