After months of speculation and worry, Gibson Brands is outlining its plan to restructure its business to address its massive debt.
The iconic guitar manufacturer has filed for Chapter 11 of the U.S. Bankruptcy Code in order to stay in business as part of a Restructuring Support Agreement it recently reached with its bond holders, Bloomberg reports.
Gibson owns more than $500 million in debts, and was due to pay back millions of that debt with two separate deadlines this summer. The company said in a statement Tuesday that the new deal "clears the pathway for the continued financing and operations of the musical instruments business as well as a change of control in favor of those noteholders."
The restructuring allows for Gibson to "unburden" itself of its consumer-electronics division, which the company says was the source of much of its fiscal problems.
Gibson has obtained an additional $135 million loans to allow it to continue operating during the transition period. Longtime CEO Henry Juszkiewicz, who publicly admitted his missteps in leadership of the brand last month, will remain in his position to "facilitate a smooth transition."
Juszkiewicz told the New York Times his attempt in the last decade establish Gibson as a consumer electronics brand was a mistake.
The CEO for years had tried to leverage Gibson's brand and music industry cachet into the consumer electronics market. Juszkiewicz said he wanted to diversify and make Gibson a "music lifestyle company," not just a guitar maker. Gibson took on debt to buy up other companies, but the investments never paid off.
There may be no guarantees about Juszkiewicz's longterm future with Gibson, but it's worth noting the executive lead an investment group that saved Gibson from going under in 1986. Maybe he can do it again.
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