Guitar Center plans to file Chapter 11, cites pandemic’s effect on sales
Westlake Village-based Guitar Center plans to file for Chapter 11 bankruptcy, citing the pandemic as a major strain on the company’s resources.
In a Nov. 13 news release, Guitar Center said that it had secured up to $165 million in new equity investments to recapitalize the company and reduce its corporate debt by nearly $800 million. The agreement also provides for $375 million in additional near-term liquidity.
The “restructuring support agreement” includes Guitar Center’s equity sponsor, a fund managed by the Private Equity Group of Ares Management Corporation, new equity investors Brigade Capital Management and a fund managed by The Carlyle Group and supermajorities of its noteholder groups.
“As a result of this financial 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 CEO Ron Japinga said in the news release.
Guitar Center has almost 300 stores throughout the United States, and sister brand Music & Arts has more than 200 stores. It is the largest privately held company based in the Tri-Counties, with an estimated revenue of more than $2 billion annually.
Because it has not filed its Chapter 11 petition yet, Guitar Center has yet to disclose the extent of its debts or other financial details. The company said its business will continue without interruptions as a result of the agreement and did not mention any planned layoffs or store closings in the initial news release, though it did say it will “explore opportunities to optimize its real estate portfolio and other agreements to focus on investments that best position the company to return to its growth trajectory prior to COVID-19.”