Gibson Brands Inc. has filed for Chapter 11 bankruptcy protection. Gibson guitars, including brands Les Paul and SG, have been played by music legends across the decades―from B.B. King and Elvis Presley to Eric Clapton and Carlos Santana.

Chapter 11 bankruptcy allows businesses to create a repayment plan to pay back their debts over time. The goal is to get the business solvent and prevent it from shutting down. Gibson’s plan is to reorganize its musical instrument business under the new ownership of its lenders.

Restructuring Pact

It is reported that pursuant to a “restructuring pact, senior lenders including Silver Point Capital, Melody Capital Partners LP and funds affiliated with KKR Credit Advisors will exchange debt for equity ownership in the reorganized company.”

The company is carrying $500 million in debt, due to the acquisition of its consumer electronics business overseas. In its bankruptcy filing, the company stated that the overseas consumer electronics business will be wound down. Gibson will re-focus on its core guitar-making and audio businesses. At present, Gibson guitar sales are strong. The sales of its electric guitars grew 10.5 percent to $122 million in January from a year earlier. Gibson sells more than 170,000 guitars annually in more than 80 countries.

Chapter 11 Bankruptcy – A Good Sign

Josh Friedman, Senior Legal Analyst at Debtwire, told The Tennessean that Gibson’s Chapter 11 bankruptcy reorganization is actually a good sign. Friedman said, “For people who are worried about whether there will still be Gibson guitars, this is a good sign. When you have investors willing to invest additional funds and take over control, in contrast to the flipside, you could look at liquidation instead of a reorganization.”

Gibson secured $135 million in debtor-in-possession financing to fund its guitar-making operations during the Chapter 11 proceedings. The company plans to exit bankruptcy this fall, on September 24, 2018.

Gibson Continuing to Make Guitars

Though some Chapter 11 bankruptcies fail, the legendary guitar maker’s reorganization plan appears to be appropriately funded. In the mean time consumers should know that Gibson is continuing to make guitars even while restructuring in bankruptcy.

Filing for Bankruptcy Protection

Many factors contribute to a company needing to file for bankruptcy. This is also true for individuals. It is rarely just one thing, or one event, that leads to the need for bankruptcy protection. Often it is a series of unfortunate or unforeseeable events, often beyond a person’s control, that necessitates the need for bankruptcy protection.

Filing for bankruptcy can help you gain financial freedom and may very well help you make today the first day of the rest of your life. Read about how Bankruptcy Stops Collection Action and follow us on Facebook for tips on money management and getting out of debt.

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