Nashville, TN (May 4, 2018)—Burdened by unmanageable debt arising in part from its $135 million acquisition of Philips’ audio and home entertainment business in 2014, Gibson Brands filed for bankruptcy on Tuesday, May 1.
While best known as the manufacturer of the iconic Les Paul electric guitar, Gibson also owns numerous pro audio brands, including KRK Systems, TASCAM, Cerwin-Vega!, Stanton headphones, Integra, TEAC, TASCAM Professional Software and Esoteric. Gibson sold its music software company Cakewalk to BandLab in February.
Once it emerges from bankruptcy, Gibson's plan is to focus on its core musical instrument and audio businesses. The bankruptcy filing included a turnaround plan that hands control of Gibson’s musical instrument business to bondholders, led by private equity firm KKR & Co.
During restructuring, the company’s Gibson Innovations business will be liquidated. According to court filings, Gibson blames much of its current financial troubles on the Gibson Innovations unit, which sells Philips-branded consumer audio and home entertainment products including headphones and speakers.
Other impediments to its financial success, according to Rolling Stone, include import regulations on rosewood and a decrease in guitar sales overall.
Following emergence from bankruptcy, the company plans to refocus on “the manufacturing of world-class musical instruments and professional audio products and the continued development of the company’s portfolio of iconic, globally recognized brands including Gibson and Epiphone, by reorganizing around its core businesses.”
As part of the restructuring, Gibson will receive a $135 million operating loan (“debtor-in-possession” financing) from its existing shareholders, which will provide the company with funds to maintain normal operations, including paying vendors and employees, among other obligations.
During the Chapter 11 proceedings, the company’s musical instruments and pro audio businesses will continue to design, build, sell and manufacture Gibson and Epiphone guitars, as well as KRK and Cerwin Vega studio monitors and loudspeakers. According to the company, “The restructuring support agreement provides funding for the musical instrument and professional audio businesses, supports the company’s key vendors, shippers and suppliers, and provides for the restructuring of the company’s balance sheet.”
According to Reuters, Gibson expects to emerge from bankruptcy on Sept. 24.
Henry Juszkiewicz, chairman and chief executive officer of Gibson Brands, and David Berryman, Gibson’s president, will both continue with the company afterwards.
Juszkiewicz said in a statement, “Over the past 12 months, we have made substantial strides through an operational restructuring. We have sold non-core brands, increased earnings and reduced capital demands. The decision to refocus on our core business, musical instruments, combined with the significant support from our noteholders, we believe will assure the company’s long-term stability and financial health.”
Gibson Brands, known as Gibson Guitar Corp. until 2013, was founded by Orville Gibson in 1902 as mandolin-maker Gibson Mandolin-Guitar Mfg. Co. Ltd. Acoustic guitars were added to its product line in the 1930s and electric guitars in 1952 with the Gibson Les Paul. Gibson was acquired by Juszkiewicz in 1986.
Other brands currently owned by Gibson include Epiphone, Dobro, Valley Arts, Kramer, Steinberger, Tobias, Slingerland drums, Maestro, Baldwin piano, Hamilton, Chickering and Wurlitzer pianos.
Gibson’s bankruptcy hearing is scheduled to take place in United States Bankruptcy Court for the District of Delaware on May 23.
Juszkiewicz posted a statement to customers about the bankruptcy on the Gibson website, emphasizing that the company does not plan to cease operations.
Gibson • www.gibson.com