Legendary guitar makers Gibson file for bankruptcy
Gibson Brands Inc. has filed for bankruptcy protection after amassing more than $500million (£367million) of debt.
The iconic Nashville-based company, whose guitars have been played by eminent rock stars including Slash, Keith Richards, Jimmy Page, Alex Lifeson and Eddie Van Halen, has reached a Restructuring Support Agreement that will see lenders take control of Gibson.
To implement the agreement, the company and its US subsidiaries yesterday (1st May) filed pre-negotiated reorganisation cases under Chapter 11 of the U.S. Bankruptcy Code.
Gibson made a disastrous acquisition of Philips' consumer audio division four years ago having forked out $135million (£99million) for the deal. The audio division of the company will now be “wound down.”
According to court papers from the management consulting firm assisting the company, Gibson’s electronics business had been "trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales."
Crucially, thanks to their agreement Gibson’s Musical Instruments and Professional Audio businesses will be able to carry on designing, building, selling and manufacturing Gibson and Epiphone guitars during its reorientation and bankruptcy proceedings.
Chairman and Chief Executive Officer of Gibson Brands, Henry Juszkiewicz, who bought the fabled company in 1986, 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 working capital demands. The decision to re-focus 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.
"Importantly, this process will be virtually invisible to customers, all of whom can continue to rely on Gibson to provide unparalleled products and customer service."
He added: "We are grateful for the continued support from our employees, customers, dealers, partners and suppliers as we move through the restructuring process.
"The Gibson name is synonymous with quality and today's actions will allow future generations to experience the unrivalled sound, design and craftsmanship that our employees put into each Gibson product."
Gibson was founded in 1902 and sells more than 170,000 guitars a year.