Guitar Center plans to file for Chapter 11 bankruptcy protection by the end of the year.
The retailer said the filing is part of a restructuring agreement it has entered into with its key stakeholders, including its private equity owners and "supermajorities" of bondholder groups. The deal would reduce Guitar Center’s debt by nearly $800 million and provide $375 million in new liquidity. The company expects the process to be completed before the end of 2020.
Guitar Center said it will continue to serve its customers through its existing channels, including its stores, websites, call centers and social media pages. It also will continue to receive goods and ship customer orders as usual.
As for any potential store closings, the company said it is “pleased” with its overall store footprint but has hired A&G to explore opportunities to “optimize” its real estate portfolio.
“This agreement will allow us to significantly reduce our debt and reinvest in our business in order to better serve our customers and deliver on our mission of putting more music in the world,” said Ron Japinga, CEO of Guitar Center. “With 10 consecutive quarters of growth prior to the impact from COVID-19, we have been pleased with our resilient financial performance during these challenging times created by the pandemic.”
Japinga continued that, as a result of the restructuring process, “we will be better equipped to execute on and invest in our strategic growth initiatives and we will continue delivering through the strength of our brands, availability of our stores, customer-focused associate relationships, innovative music education programs and our expanding digital solutions.”
Guitar Center has negotiated to have a total of $375 million in debtor-In-possession financing provided by certain of its existing noteholders and ABL lenders. It also intends to raise $335 million in new senior secured notes.