Guitar Center has officially filed for Chapter 11 bankruptcy protection. The move was filed late Saturday night, November 21.
The country’s largest retailer for music instruments has been hit hard by the pandemic. Many of its stores have been temporarily closed and its digital business has struggled to compete against rivals for some time now.
Guitar Center said it had struck a deal with its creditors that would lower its significant debt burden from $1.3 billion by $800 million. It has secured financing by its current owner, the private equity firm Ares Management Corporation, as well as funds managed by the hedge fund Brigade Capital Management and the Carlyle Group.
Guitar Center says they will still operate as usual through this. It says it expects to emerge from bankruptcy by the end of the year.
“Guitar Center will continue to meet its financial obligations to vendors, suppliers, and employees, and intends to make payments in full to these parties without interruption in the ordinary course of business,” a press release about the bankruptcy says.
“Guitar Center will continue to provide uninterrupted service to its customers through its existing channels, including its stores, websites, call centers and social media pages, and will continue to receive goods and ship customer orders as usual.”
Though Guitar Center had 10 consecutive quarters of sales growth through the end of February, according to a court filing that was all “wiped out” by the pandemic. It missed a $45 million debt payment last month that made bankruptcy look likely according to the New York Times. 75% of stores closed due to the pandemic at one point.
Guitar Center was founded in 1959, but over the past 15 years it has seen its fortunes change. In 2007, private equity company Bain Capital acquired it for $1.9 billion and like many of these deals, left it saddled with too much debt. To reduce debt, some of the debt was converted to equity making Ares Management the majority shareholder in 2014. It still had $1.3 billion in debt from the Bain takeover this year. Now the place that musicians go to test out instruments and occasionally buy has gone bankrupt.