Down-but-not-out instrument maker Gibson is working on restructuring its debts in the hopes of putting reports of a looming bankruptcy to bed.
The iconic brand behind the Les Paul and SG — beloved by Pete Townshend, Jimmy Page, Neil Young and countless other guitar gods — recently announced that it is in the process of finding a new credit facility to replace $375 million of senior secured notes before they mature in six months. If those notes are not refinanced by July 23, another $145 million in bank loans will immediately become due.
In a statement, the Nashville-based company said it “fully expects the bonds to be refinanced in the ordinary course of business” and is “concluding a thorough strategic and budget planning process to identify those areas where it can maximize its investments, and pare back areas where investments have not been performing to expectation.”
Gibson, which has annual revenues of more than $1 billion, said that while its musical instruments and pro-audio division have been profitable, they are “still below the level of success we saw several years ago,” explained chairman and CEO Henry Juszkiewicz. The company also said it wants to streamline its Philips consumer audio brand to focus on brands with optimal growth potential.
“We have been monetizing assets like stock holdings, real [estate] property and business segments that could not achieve the level of success we expected,” said Juszkiewicz. “By monetizing these assets, we can reduce debt and generate funds to contribute to business segments that are thriving. It is important to our business to get back to the financial success we had to achieve the best financial terms in the refinancing of our company.”
Gibson said it expects this strategy to lead to its best financial results in its 124-year history and an ability to “pay back the company’s debt in whole within several years.”
To guide this recovery, the company has hired Benson Woo as its new chief financial officer, starting this week. Woo replaces recently departed Bill Lawrence, who held the position for less than a year.