Musical instrument retailer Guitar Center has filed for Chapter 11 bankruptcy protection after negotiating a debt-cutting deal with key investors and lenders.
The company, which has been struggling with excessive debt for years, said it plans to remain in business and slash its debt by nearly $800 million.
“Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world,” CEO Ron Japinga said in a statement. “Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”
The Westlake Village, Calif.-based retailer said earlier this month that it’s “pleased with its overall store footprint,” which includes nearly 300 Guitar Center stores and more than 200 Music & Arts stores.
But the retailer said it had hired a real estate firm “to explore opportunities to optimize its real estate portfolio and other agreements to focus on investments that best position the Company to return to its growth trajectory prior to COVID-19.”
Guitar Center sells and rents instruments, provides lessons and handles repairs. The company’s other brands include Musician’s Friend, Woodwind Brasswind and AVDG.
Like most non-essential retailers, Guitar Center was forced to temporarily close its stores in the early days of the pandemic. While its online revenue jumped during that period, “we expect revenues generated will not cover the sales that would have occurred through the stores,” S&P Global Ratings wrote in a research note in late May.
Guitar Center said it had reached a restructuring deal with its controlling owner, a fund managed by private equity firm Ares Management, which acquired its stake in Guitar Center in 2014. The company said it also got support for its deal from new investors Brigade Capital Management and a fund managed by The Carlyle Group and from various lenders.