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Gibson Brands, Inc. – makers of the iconic Gibson guitars played by Slash among many others – is “running out of time” to resolve serious debt issues that could shut it down, a finance expert said.
The company, which has annual revenues of more than $1 billion, has to deal with upcoming repayments totaling $375 million, with a further $145 million due if the first amount is not serviced by July 23.
Commentators noted the chances of refinancing in time looked “slim,” the Nashville Post reported. CFO Bill Lawrence recently left the company after less than a year in the position, and the options facing owner and CEO Henry Juszkiewicz looked “likely to sideline” him. A deal with equity firm GSO Capital Partners, which brought in an emergency $130 million loan last year, had left some holders of the $375 million bonds worried about the security of their investment and made worse by a “lack of clarity” from Gibson.
Juszkiewicz had three realistic options, one expert said: He could renegotiate the bonds for new ones, which might turn out to be too expensive; he could hand over some of his own equity to cover the amounts; or he could commence bankruptcy proceedings. “This year is crucial and they are running out of time – rapidly,” said Kevin Cassidy of Moody’s Investors Service. “And if this ends in bankruptcy, [Juszkiewicz] will give up the entire company.”
Gibson’s problems are thought to have arisen mainly through their electronics operations, which have seen a sales slump in recent years. The firm made a $16.6 million payment to bondholders last week after selling a warehouse for $6.4 million, while another building should raise $11 million when it is sold. A regular financial report is due by next week. “Some type of restructuring will be necessary,” Cassidy said. “The core business is a very stable business and a sustainable one. But you have a balance sheet problem and an operational problem.”
The Gibson Mandolin-Guitar Mfg. Co. was founded in 1902 by Orville Gibson. It introduced the famous Les Paul guitar 50 years later.
Gibson Brands, Inc. – makers of the iconic Gibson guitars played by Slash among many others – is “running out of time” to resolve serious debt issues that could shut it down, a finance expert said.
The company, which has annual revenues of more than $1 billion, has to deal with upcoming repayments totaling $375 million, with a further $145 million due if the first amount is not serviced by July 23.
Commentators noted the chances of refinancing in time looked “slim,” the Nashville Post reported. CFO Bill Lawrence recently left the company after less than a year in the position, and the options facing owner and CEO Henry Juszkiewicz looked “likely to sideline” him. A deal with equity firm GSO Capital Partners, which brought in an emergency $130 million loan last year, had left some holders of the $375 million bonds worried about the security of their investment and made worse by a “lack of clarity” from Gibson.
Juszkiewicz had three realistic options, one expert said: He could renegotiate the bonds for new ones, which might turn out to be too expensive; he could hand over some of his own equity to cover the amounts; or he could commence bankruptcy proceedings. “This year is crucial and they are running out of time – rapidly,” said Kevin Cassidy of Moody’s Investors Service. “And if this ends in bankruptcy, [Juszkiewicz] will give up the entire company.”
Gibson’s problems are thought to have arisen mainly through their electronics operations, which have seen a sales slump in recent years. The firm made a $16.6 million payment to bondholders last week after selling a warehouse for $6.4 million, while another building should raise $11 million when it is sold. A regular financial report is due by next week. “Some type of restructuring will be necessary,” Cassidy said. “The core business is a very stable business and a sustainable one. But you have a balance sheet problem and an operational problem.”
The Gibson Mandolin-Guitar Mfg. Co. was founded in 1902 by Orville Gibson. It introduced the famous Les Paul guitar 50 years later.
