Gibson Guitar’s arduous bankruptcy could be coming to a close, according to negotiation details now emerging.
A few months ago, we first reported that Gibson Guitar was about to enter Chapter 11 bankruptcy. Now, it looks like Gibson is likely to make it out alive.
According to the paperwork filed in the U.S. Bankruptcy Court in Delaware last week, a broad-reaching agreement involving various creditors looks close to being sealed. If the complex deal is approved by all sides, a restructured Gibson Guitar will have another shot at life.
The latest filing represents the fourth revision to a working agreement, with approvals potentially coming in a matter of days. The ‘Fourth Amended Joint Chapter 11 Plan of Reorganization’ can be found here.
As part of the deal, chief creditors Blackstone and Philips Electronics would accept reduced paybacks on their outstanding loans. Specifically, Blackstone unit GSO Capital Partners would be paid $30 million, while Philips would accept a payout of $57.2 million.
Of course, neither payout represents the full amount owed. But both groups could benefit from future upside, especially if the restructured Gibson manages to grow post-bankruptcy. Also central to this arrangement is private equity group KKR, which would assume a far greater level of control over the company.
If signed, Gibson the debtor will become Gibson the restructured guitar company. The agreement clearly states: “the Released Parties will be deemed forever released and discharged by the Debtors, the Reorganized Debtors, and their Estates… from any and all Causes of Action whatsoever.”
Henry Juszkiewicz, the ousted CEO and one of two previous owners, would assume a seriously reduced role in the restructured entity.
Specifically, Juszkiewicz would embark on an ‘extended vacation’ (per the document’s wording) and lose most of his equity in the company.
Accordingly, Gibson would “delegate all responsibility and functions as chief executive officer” to a brand-new Chief Restructuring Officer, Brian Fox, who actually works for turnaround specialist Alvarez & Marsal. Gibson, under newly-restructured management, would also hire other outside consultants to complement Fox’s role.