Guitar-maker Gibson on Tuesday filed for bankruptcy as debt woes continue to haunt the firm. As part of the restructuring plan, it wants to focus on its core musical instruments business and hence, plans to wind up its consumer electronics division.
The company seems to be in the “history repeats itself” moment. In 1986, Henry Juszkiewicz, along with Dave Berryman, had rescued Gibson, which was struggling financially. With Juszkiewicz at the helm, the guitar maker restored its past glory, in turn becoming financially healthy. Fast forward to 2018, still Juszkiewicz heading the firm, Gibson is struggling to repay the debt, which has piled up due to acquisitions.
Juszkiewicz wanted to diversify Gibson and forayed into consumer electronics through acquisitions. He bought out Onkyo, TEAC and Philips’ home entertainment division between 2012 and 2014, with Phillips acquisition alone costing $135 million. Grouped under Gibson Innovations division, it started selling consumer electronics products. But due to intense competition, sales of the products from this division slumped, leaving a huge debt burden on the company. As per the bankruptcy filing, Gibson has $500 million in debt.
Gibson inked an agreement with its lenders Melody Capital Partners, Silver Point Capital and KKR Credit Advisor and has come up with a restructuring plan. As part of the revamp, lenders will take ownership of the firm, who have also agreed to infuse $135 million to keep the guitar business running.
Post the restructuring and change of ownership, the role of Juszkiewicz is still not clear. There are high chances lenders might appoint a new leadership team, replacing Juszkiewicz, ending his three decade stint with Gibson.
The iconic guitar-maker, which has catered to the likes of Elvis Presley, Pete Townshend and BB King, is selling over 170,000 guitars every year. Gibson’s music instruments division has 875 employees, as per the filing.
With new a restructuring plan in place, and renewed focus on its core guitar business, the Les Paul maker is trying to restore its rich heritage under new ownership. If all goes well, the company could come out of bankruptcy by September.