Gibson Out Of Bankruptcy
For the first time in a good long while, it’s all looking up for Gibson Guitars. The good news is that Gibson made it out of bankruptcy on October 1st – the even better news is that it will remain in business. It was touch and go for a bit as private equity investors KKR and Blackstone battled to reach different outcomes. Blackstone had pushed for liquidation of the company, but the judge approved a transfer of ownership to KKR, who intends to rebuild the company. The new settlement increases recoveries of unsecured debt to 10.8%, about double of earlier plans, according to Music Trades Magazine.
Both Henry Juszkiewicz and Dave Berryman, who purchased the company in 1984, no longer hold management positions or a stake in the new version of the company. Gibson hasn’t hired a new CEO yet, but KKR director Mathew Ross is acting in that position in the interim.
The reorganization has allowed the company to wipe out about $500 million worth of debt. As noted in previous articles, that debt didn’t come as a result of its core guitar business but its foray into consumer electronics. In order to diversify, Gibson borrowed money to acquire companies like Teac and Philips, which lead to increased losses when that part of the market never took off as planned. Of course, some guitar decisions like the robot tuners were not exactly embraced by players either, nor was the increase in prices for the bread and butter instruments that the company was noted for.
As seen here, Gibson has already begun to concentrate on guitars again, reissuing a number of proven sellers and even lowering prices to make them more affordable than in the recent past. This is great news as the industry can’t afford to have one of its iconic companies either hobbled or even out of business entirely. Luckily, that won’t be happening, at least for now, as the future for the company finally looks bright once more.
UPDATE: Gibson named a new CEO today. It’s James “JC” Curleigh, currently global president of clothing company Levi Strauss & Co. He’ll begin his new gig next month.
