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Guitar Centre, the USA’s largest musical instrument retailer has filed for chapter 11 bankruptcy.
The company has 300 stores across the country plus 200 under its sister brand of Music & Arts.
Covid has had a huge impact on many retail companies over the past 12 months and as a “non-essential” business stores such as Guitar Centre have had to close their doors throughout large parts of the ongoing pandemic. Coupled with increasing rates of unemployment and the associated downturn in spending it seems that Guitar Centre was left with no choice but to file for chapter 11.
This is of course not the end of Guitar Centre. As we saw with Gibson, chapter 11 gives the companies protection from creditors whilst they restructure and reduce debt. Gibson successfully emerged from chapter 11 in a much stronger position than when they filed for it.
Guitar Centre need to shave approx $800 million off their debt. But the company does have $165 million of new investment.
We may see some stores close permanently and there will inevitably be job losses but for now, at least there does seem to be a clear way out of the current situation.
However, given that the company has estimated liabilities of $1 billion to $10 billion, with a similar range for its assets it could still be a rocky road ahead. For now though the company is continuing business as normal.
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