Following a report last month that Guitar Center was considering filing for bankruptcy, the instrument retailer has indeed decided to go that route in an effort to save the company.
According to a press release, Guitar Center will file for Chapter 11 bankruptcy, striking a deal with key investors and lenders that would reduce debt by $800 million and “best position the company to return to its growth trajectory prior to COVID-19.” The agreement also stipulates that “all financial obligations to vendors, suppliers, and employees will continue to be paid in full in the normal course.” In short, the company intends to move ahead with business as usual following the agreement.
Guitar Center stated that it reached the restructuring deal with the company’s controlling owner, a fund managed by private equity firm Ares Management (which acquired a stake in Guitar Center in 2014, per USA Today). The company also received support for its deal from new investors Brigade Capital Management and a fund managed by The Carlyle Group and other lenders.
“Today we announced a very important and positive step forward to ensure the long-term financial strength of Guitar Center,” CEO Ron Japinga said in the press statement. “This agreement will allow us to significantly reduce our debt and reinvest in our business in order to better serve our customers and deliver on our mission of putting more music in the world. With ten consecutive quarters of growth prior to the impact from COVID-19, we have been pleased with our resilient financial performance during these challenging times created by the pandemic.”
The pandemic has been especially tough for Guitar Center. While the company operates a robust e-commerce site — including a transparent “used” section, allowing customers to browse the secondhand stock of any store — Guitar Center’s emphasis has always been on their many brick-and-mortar shops. Operating 269 locations, it’s arguably the most ubiquitous physical music gear store in the US.
But as a “non-essential” business, retailers like Guitar Center were forced to close or significantly limit operations during lockdown. Similar restrictions could return as COVID-19 case counts surge across the country. The bankruptcy announcement stressed that “business operations will continue uninterrupted,” but, as we’ve seen across the music industry at large, circumstances remain uncertain during the pandemic.
Editor’s note: During the pandemic, Consequence of Sound is supporting independent musicians by donating a portion of all proceeds from our webstore to the MusiCares’ COVID-19 Artist Relief fund. Grab yourself a face mask, T-shirt, hoodie, or even some CBD.