January 31, 2023

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Guitar Center File for Bankruptcy

2 min read

As expected, the guitar center, a mecca of the largest musical instrument retailer and musicians in the United States, filed for bankruptcy protection late Saturday night, the New York Times reported. The company, which missed a-45 million bond-interest rate last month, has a debt of about ৩ 1.3 billion and has been deeply affected by the coronavirus epidemic.

The company entered a reorganization process in Chapter 11 in the U.S. District Court for the Eastern District of Virginia and said in a statement that it would continue to pay its vendors and employees in full. It said it had reached an agreement with plan payers on a plan that could reduce its debt by 800 million and secure new funding. These investors include funds managed by its current owner, the private equity firm Ares Management Corporation, and Brigade Capital Management Carlyle Group.

The company said it is optimistic it will emerge from bankruptcy by the end of the year.

CEO Ron Jopinga said in a statement, “This is an important and positive step in our process to significantly reduce our debt and increase our ability to reinvest in our business to support long-term growth.”

Since the lockdown began, many musical instrument retailers have seen strong sales online, the Guitar Center lacked the e-commerce infrastructure to fully capitalize on those sales, and was even overtaken by competitors such as Sweetwater.

In 2014, Ares converted his debt from guitar center to equity ownership and became the controlling shareholder. The guitar center sold nearly $ 2.3 billion in its most recent fiscal year, according to a Modi report.

The Westlake Village-based guitar center in California has about 300 stores in the United States, as well as 200 outlets of the Sister brand. With the onset of the epidemic, it reduced costs and staffing, and in April there was an agreement with bondholders to fix what was previously avoided in the sale of new notes and previous payments, avoiding a default. The company began reopening its stores on a limited basis in July, and also saw strong online shopping.

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