Musical instrument retailer Guitar Center recently announced it filed for bankruptcy as part of its financial restructuring plan. Guitar Center, the largest musical instrumental retailer in the U.S., had been struggling to compete against online competitors even before the COVID-19 pandemic. The company’s issues were compounded when it had to temporarily close almost 75% of its stores earlier this year, according to The New York Times.
Guitar Center joins a long line of retailers like J. Crew, Neiman Marcus and J.C. Penney who were unable to overcome the decreased foot traffic during the pandemic. While many people turned to hobbies like learning a new instrument during the lockdown, they were purchasing gear from online retailers rather than traditional brick and mortar businesses like Guitar Center. The company reported 10 consecutive quarters of sales growth through the end of February, but those gains were eliminated during the pandemic.
The company also announced it secured new financing to implement its restructuring plan through a fund managed by the Private Equity Group of Ares Management Corporation. The Carlyle Group and Brigade Capital Management will also manage funds that will help support Guitar Center. This financial restricting plan is expected to deleverage Guitar Center’s balance sheet, create more financial flexibility and provide extra liquidity so the company can still support its vendors, employees and suppliers.
“This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth,” Guitar Center CEO Ron Japinga said in a statement. “Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”
With this plan in place, Guitar Center and its related brands should still be able to operate as usual while the transaction is implemented. The company plans to continue to meet its financial obligations, which include making payments in full without interruption. Additionally, Guitar Center plans to provide uninterrupted service to its customers through its stores, call centers and social media platforms.
Meanwhile, Guitar Center has been pleased with its overall store footprint, but it recently reached out to A&G Realty Partners to explore opportunities to optimize its real estate portfolio and other agreements to focus on investments that best position to return to its growth trajectory prior to the COVID-19 pandemic.
Joe Dyton can be reached at joed@fifthgenmedia.com
