We’ve been hearing about declines in guitar sales for years. Now, one the most storied guitar makers in history — Gibson — may be in serious trouble.
Gibson Guitars is now falling on hard times, and ster guitar sales are just part the picture. According to details surfacing this week, the company remains deluged in debt, with desperate sell-fs to service a growing list debtors.
Ringing the scary alarm is Nashville Post reporter Geert De Lombaerde, who unearthed mountainous debt payments and a worsening financial crisis. De Lombaerde pointed to a recent, $16.6 million coupon payment by Gibson to service $375 million senior secured notes that come due this year.
The debt pile wasn’t a secret to frustrated bond holders. But De Lombaerde is seeing an iceberg ahead. “The situation facing the iconic Nashville-based music instrument maker, which has annual revenues more than $1 billion, is far from normal,” De Lombaerde remarked. “CFO Bill Lawrence recently left the company after less than a year on the job and just six months before $375 million senior secured notes will mature.”
“On top that, another $145 million in bank loans will come due immediately if those notes, issued in 2013, are not refinanced by July 23rd.”
Gibson Guitars started in 1902, and has been interwoven into the musical life America ever since.
Back in 1952, the company produced a signature Les Paul, perhaps one the most famous guitar series all time. The rest, as they say, is history, though that storied history is making the present harder to stomach.
Just recently, Gibson sold its ownership the former Baldwin Piano warehouse for $6.4 million. Now, the guitar maker is trying to fload an even bigger Nashville property: the Valley Arts building, located on Church Street. The sellf is expected to draw $11 million. Both payments are likely to evaporate almost instantly to service a growing debt tranche.
We’ve read a separate report that Gibson is selling f Baldwin entirely — though that hasn’t been confirmed.
Gibson still pulls annual revenues north $1 billion. But multiple investors are now saying the ‘b-word’.
“This year is critical and they are running out time — rapidly,” Kevin Cassidy, a senior credit ficer at Moody’s Investors Service, told the Post. “And if this ends in bankruptcy, CEO/owner Henry Juszkiewicz] will give up the entire company.”
Moody’s has already downgraded Gibson. And others are projecting a major change ahead — in leadership, or total control the company.
One question is whether sagging guitar sales are playing a role here. This has been a growing problem for years, thanks to surging interest in EDM and rap. The recurring ‘rock & roll is dead’ cliché may finally be coming true — and seriously impacting Gibson’s bottom line.
Incidentally, Moody’s also downgraded Guitar Center last year, as well. The mega-retailer, a massive seller guitars, is currently saddled with more than $1.6 billion in debt.
The issue plunging guitar sells first became glaringly apparent last year.
That’s when sales figures revealed a serious sales drop over the past decade. Specifically, guitar sales have dropped from approximately 1.5 million units annually to roughly 1 million. That still a million a year, though this is all heading in the wrong direction.
One obvious problem is that the guitar is just another toy for younger people today. Up until relatively recently, it was a must-have for a giant percentage young Americans — all whom were in love with rock & roll in some form or another.
And the ‘guitar gods’ the past are fading, with their adherents downsizing. “I don’t know. Maybe the guitar is over,” Eric Clapton said last year when asked about eroding guitar sales.
“Good question though.”
