Guitar Center, after a series of financial troubles including having its credit rating downgraded earlier this year and undergoing debt restructuring, is reportedly preparing to file for a potential bankruptcy.
According to the New York Times, a source has said the retail giant missed an interest payment of $45 million earlier this month, setting off a 30-day grace period that could end in default. According to the anonymous source, Guitar Center has reached out to creditors to discuss a plan, which could involve filing for bankruptcy this year and exiting from it in early 2021.
However, it still might be able to avoid filing for bankruptcy by doing what it did earlier this year: skipping an interest payment with a distressed debt exchange, which is what led to the company’s third credit-rating downgrade of 2020.
Guitar Center is the biggest musical instrument retail chain in the US, with almost 300 locations across the country. Its owner, Ares Management, declined to comment to the New York Times on its reported $1.3 billion of debt.
The potential filing comes in the wake of a surge of instrument sales for the brand during the pandemic. However, COVID-19 also presented challenges for the company, which had to furlough 9,000 employees at the beginning of the pandemic.
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