Just When We Thought It Was Over, Gibson Runs Into Bankruptcy Trouble Again

I’m pretty tired about writing about Gibson Brands, but the company keeps on managing to stay in the news, usually not in a positive way. Gibson was sailing through bankruptcy and looked like it was about to exit when it ran into trouble again.

To recap, the company got into a big financial hole trying to diversify into consumer electronics, primarily through borrowing to acquire companies. When things dipped to their worst, a group of six major debt holders arranged for some interim financing, jettisoned most of the consumer companies, and brought in a new management team. Everything seemed to be going to plan, with new products that resembled the Gibson of old at prices more applicable to the current market, and the judge approving a plan to discharge the company from bankruptcy.

That was all well and good, but the U.S. Trustee overseeing the bankruptcy filed an objection that stopped it in its tracks, stating that not all of the existing claims against the company have been fully administered, and the company isn’t following the exit plan it laid out to the court.

Essentially, the Trustee said that there was some sophisticated financial engineering going on by the new management of the company that was trying to avoid paying the bankruptcy fees.

When you consider that there are some big time private equity companies involved here that regularly play in the financial arena, it’s not a surprise. In fact, it’s more of an eye-opener that the Trustee has stepped in.

What all this means is that Gibson is still not free from bankruptcy and is still under the purview of both the court and the Trustee. That means that the company continues to be restricted on how it spends its money and must closely follow the plan that it had previously laid out to the court.

That should make for yet another interesting NAMM. Hopefully this story goes away soon.

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