Gibson Guitars Bankruptcy

Gibson Cutting Staff Amid Worsening Financial Problems

Following on from news of Gibson’s deteriorating financial situation it seems they have now started laying off staff.

Gibson have outstanding loans exceeding $500 million and they are due to make substantial payments by late July and early August of this year.  If Gibson is unable to meet those obligations, analysts say bankruptcy is a near-certain possibility.

The credit ratings agency Standard & Poor’s recently downgraded their rating on Gibson to near-junk status, based on existing debt, revenue problems, and operational overhead.  Earlier this year, Moody’s also downgraded the guitar maker, making it extremely difficult for Gibson to secure additional cash.

An analyst at Moody’s remarked that bankruptcy was now a very real possibility.

According to the Nashville Post, Gibson has already started laying off employees.  So far, that includes 15 employees at an Elm Hill Pike plant this week.  Specifically, the cuts were made at the Gibson Custom Shop, which focuses on higher-end, custom guitar manufacturing.

According to Bloomberg, the activist group of bondholders is now pushing for the CEO Henry Juszkiewicz to give up ownership control and cede the company to them.  Juszkiewicz is strongly resisting those pressures, though it’s unclear if he’ll be able to retain control of the guitar maker if a default occurs.

Whatever happens it is pretty clear that the brand of ‘Gibson’ will survive in one form or another. Outside investors are eyeing the company for a possible vulture acquisition most notably the Chinese but also other interested parties. However they are all waiting for the company to plunge into bankruptcy first.  This would introduce a distressed price point, while allowing the investment consortium to shed entire factories, management teams, and legacy financial obligations.

For more on Gibson’s troubles follow the thread on our forum here

 

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