Guitar Center Officially Files For Bankruptcy, But Promises ‘Business As Usual’

Guitar Center has confirmed that it has filed for bankruptcy. But what does that mean for musicians?

The Guitar Center Chapter 11 bankruptcy hopes to strike a deal with key investors and lenders to reduce debt by $800 million and “best position the company to return to its growth trajectory prior to COVID-19.” 

“Today we announced a very important and positive step forward to ensure the long-term financial strength of Guitar Center,” CEO Ron Japinga said in a statement. “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. With ten 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.”

How Is “Business As Usual” Possible?

Despite the bankruptcy filing, Guitar Center is promising business as usual in its 269 stores. According to the filing “all financial obligations to vendors, suppliers, and employees will continue to be paid in full in the normal course.”

While some may be spooked by the filing and restrict deliveries, the move will not come as a surprise to most Guitar Center suppliers who have long expected it.

Also, most of the $800 million in debt that Guitar Center is hoping to shed is to investors and lenders, and not to Fender, Gibson, and its hundreds of other suppliers.

Private equity firm Ares Management acquired a stake in Guitar Center in 2014 and the retailer has received support for this restructuring from new investors Brigade Capital Management and a fund managed by The Carlyle Group.