One of the marquee names in the guitar industry, Gibson, is preparing for life after bankruptcy. The nearly 116-year-old company submitted a plan to keep itself in business that was approved in a U.S. Bankruptcy Court on Tuesday (Oct. 2).
Gibson initially filed for Chapter 11 bankruptcy in May, with a reorganization plan already in place to allow them to keep operating with $135 million of lent money. After that, the company rededicated to making musical instruments, since much of its financial troubles stemmed from an ill-fated foray into consumer electronics.
The plan, per Reuters, is for Gibson to wipe its $500 million of debt and use as much as $70 million to galvanize its “business plan for growth.” Gibson will be run by its bondholders, including Kohlberg Kravis Roberts & Co. and Melody Capital.
It’s a smart time for a move back into the fretted instrument market, as data from Music Trades indicated that acoustic guitar sales were up 8.6 percent from 2016 to 2017, and 9.1 percent for electric guitars. The broader fretted instrument retail market rose by 8.9 percent, generating $1.94 billion.
Per The Wall Street Journal, Gibson CEO Henry Juszkiewicz will likely be replaced and will be placed on a one-year consulting contract. In a February interview with Billboard, Juszkiewicz talked about how the guitar industry can be notoriously slow to change and adapt to a new consumer landscape.
“[The industry is] stuck in a time warp, and the ‘purists’ have a very loud voice on the online forums. If you are a kid today, you have an iPad by the age of two, and if you’re not offering new technology you’re old. Kids today may think some music from the ’50s is kind of cool here and there, but what other industry do you know that hasn’t changed since the ’50s?” he said. “Those guitars from the ’50s are what the purists want, but we have to have something new and exciting. Imagine if the camera had never changed. Innovation is a part of every business to some degree, but [the guitar industry] hates it.”