Gibson Brands CEO Henry Juszkiewicz is now responding to looming bankruptcy concerns. His comments weren’t the most reassuring.
Amidst urgent asset sell-fs, sinking sales, slumping demand for guitars, and looming bankruptcy concerns, Gibson Brands Chairman and CEO Henry Juszkiewicz is hoping to calm the waters. But a recently-issued statement on the matter is likely to inflame concerns, not quell them.
+ Friday, February 16th: Gibson Guitar Faces Imminent Bankruptcy After 116 Years In Business
As part a broader statement sent to Digital Music News, Gibson outlined its intent to finish paying a massive, existing bond debt. The company is also aiming to secure additional loans to keep the company going. Those loans — if secured — will likely be valued in the hundreds millions dollars.
Gibson’s debt obligations include a recent, $16.6 million coupon payment on an enormous, $375 million bond note that comes due in July.
A separate, $145 million in bank loans is also hovering, with Gibson apparently scrambling to meet its aggressive debt payf schedule. Sounds horrifying, especially for a company with ‘just’ $1 billion in annual revenues. But Gibson stressed that it has not defaulted on existing debt obligations.
“Gibson Brands, Inc. today announced that it has met all current obligations to the bondholders, is in the process arranging a new credit facility to replace the bonds, and fully expects the bonds to be refinanced in the ordinary course business,” the company noted in its statement.
Juszkiewicz underscored that message, pointing to a ‘business as usual’ situation. “These bonds expire as all fixed income instruments do at the end their term,” the Chairman explained. Juszkiewicz also noted that the company has retained Jefferies investment bank to manage its sizable debt portfolio.
Meanwhile, ratings firms like Moody’s are downgrading the company, while openly pointing to bankruptcy ahead.
Part that picture includes sell-fs prime Nashville buildings, even as the value those properties increase.
In the statement, Juszkiewicz acknowledged that the company was floading multiple properties. But the CEO characterized the sales as mere asset diversification. “We have been monetizing assets like stock holdings, real property and business segments that could not achieve the level success we expected,” the CEO explained.
“By monetizing these assets, we can reduce debt and generate funds to contribute to business segments that are thriving.”
Analysts seem less convinced the ‘thriving’ descriptor. And broader market challenges remain. In comments over the weekend, guitar buyers pointed to a glut fantastic used guitars, not to mention half-priced Chinese competitors.
Others debated whether enough demand exists anymore, and the data isn’t encouraging. According to stats shared by the Washington Post, US-based guitar sales have plunged more than 35% over the past decade, thanks to massive competition from DJ equipment, DAW stware, and simple laptops.
All the while, competition within the guitar space remains fierce.
Here’s the complete statement from Gibson.