Guitar Center has filed for Chapter 11 bankruptcy protection with plans to reduce its debt by $800 million.
The largest seller of musical equipment in the U.S. said it plans to keep its nearly 300 U.S. stores open during the process, which it expects to complete by the end of the year. As previously reported, Guitar Center is “pleased” with its overall store footprint, and has hired A&G to explore opportunities to “optimize” its real estate portfolio.
Guitar Center’s owner, private equity company Ares Management Corp., along with new investors including funds managed by the Carlyle Group and Brigade Capital Management, will provide financing through the bankruptcy process. The company has received $165 million in new equity investments. It has negotiated to have a total of $375 million in debtor-in-possession financing provided by lenders and current noteholders, and intends to raise another $335 million in senior secured notes.
“This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth. Ron Japinga, CEO of Guitar Center. “Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”
Guitar Center operates nearly 300 stores under its own banner and more than 200 Music & Arts stores, which specialize in band ane orchestral instruments for sale and rental, serving teachers, band directors, college professors and students. It also operates Musician’s Friend, a leading direct marketer of musical instruments in the United States.