May 1 (UPI) — Guitar-maker Gibson filed for Chapter 11 bankruptcy Tuesday, with plans to give some of the company’s lenders equity in the business.
The company said in a statement it will continue to operate during the proceedings as it focuses on reorganizing around its core businesses.
The change in control will give noteholders — including Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors — equity in a new company, replacing current stockholders like CEO Henry Juszkiewicz.
“Over the past 12 months, we have made substantial strides through an operational restructuring,” Juszkiewicz said.
“We have sold non-core brands, increased earnings, and reduced working capital demands. The decision to re-focus on our core business, Musical Instruments, combined with the significant support from our noteholders, we believe will assure the company’s long-term stability and financial health.”
Juszkiewicz will continue with the company upon emergence from bankruptcy “to facilitate a smooth transition.”
The company said existing noteholders have committed $135 million in debtor-in-possession financing.
“Gibson will emerge from Chapter 11 with working capital financing, materially less debt, and a leaner and stronger musical instruments-focused platform that will allow the company and all of its employees, vendors, customers and other critical stakeholders to succeed,” Gibson said.
Gibson, founded in 1894, said it sells more than 170,000 guitars annually in 80 countries. Its guitars are U.S.-made, with factories in Nashville and Memphis, Tennessee and Bozeman, Mont.