Gibson Guitar is now battling a deteriorating financial situation, with layfs already underway. The company is desperately lowering overhead to meet critical loan obligations ahead.
Gibson Guitar is now desperately trimming its operational overhead costs to stave f a near-term bankruptcy. Last week, the company acknowledged outstanding loans exceeding $500 million, with payfs due by late July and early August this year. If Gibson is unable to meet those obligations, analysts say bankruptcy is a near-certain possibility.
+ February 16th: Gibson Guitar Faces Imminent Bankruptcy After 116 Years In Business
According to the Nashville Post, Gibson has already started laying f employees. So far, that includes 15 employees at an Elm Hill Pike plant this week. Specifically, the cuts were made at the Gibson Custom Shop, which focuses on higher-end, custom guitar manufacturing.
That’s one several Gibson manufacturing operations sprinkled throughout Nashville, leading to fears broader cuts ahead. And Gibson’s CEO is doing little to allay those concerns. In comments issued by Gibson chief Henry Juszkiewicz, the layfs were acknowledged as “part broad initiative throughout the company to prepare for our refinancing,” and a “Spring cleaning sorts” to lighten the operational load.
The Custom Guitar Shop focuses on handmade, painstakingly-crafted guitars, with price points starting at $4,000. Depending on the model and specifications, those prices can easily soar past $20,000. Those high-tailored guitars certainly help the Gibson brand, though financially, they may not be generating sustainable revenues.
More importantly, the presence less pritable operations will reduce Gibson’s chance getting emergency funding.
Just recently, Standard & Poor’s downgraded their rating on Gibson to near-junk status, based on existing debt, revenue problems, and operational overhead. Earlier this year, Moody’s also downgraded the guitar maker, making it extremely difficult for Gibson to secure additional cash.
An analyst at Moody’s remarked that bankruptcy was now a very real possibility.
Meanwhile, creditors are putting heavy pressure on Juszkiewicz to relinquish control the company.
According to Bloomberg, the activist group bondholders is now pushing for the CEO to give up ownership control and cede the company to them. Juszkiewicz is strongly resisting those pressures, though it’s unclear if he’ll be able to retain control the guitar maker if a default occurs.
Separately, outside investors are eyeing the company for a possible vulture acquisition. According to details shared with Digital Music New, a group investors based in China are now considering a buyout. But they’re waiting for the company to plunge into bankruptcy first. That would introduce a distressed price point, while allowing the investment consortium to shed entire factories, management teams, and legacy financial obligations.
More as this develops.