Guitar Center has filed for Chapter 11 bankruptcy protection, the latest chain retailer to succumb to the coronavirus pandemic and significant drop-off in consumer demand for discretionary goods and services.
The retailer announced it had filed for Chapter 11 bankruptcy protection “to significantly reduce our debt and enhance our ability to reinvest in our business.” Guitar Center aims to emerge from bankruptcy before the end of the year, the company said.
In its filing, Guitar Center said its lenders already have agreed to cut the company’s debt by nearly $800 million, and that it has also secured up to $165 million in new equity investment.
Like other retailers, the 61-year-old company was forced to close many of its stores in March during nationwide lockdowns, struggling to get customers to buy instruments even after lockdowns ended. Guitar Center has 269 locations, many in shopping malls.
Shopping malls themselves have struggled through the pandemic as retailers have been forced to close their brick-and-mortar operations, sparking an economic chain reaction that has hit mall owners’ bottom lines.
Shopping mall operator CBL & Associates Properties (CBL) – Get Report earlier this month filed for Chapter 11 bankruptcy protection, becoming the latest mall operator seeking to restructure its operations.
While Guitar Center had turned to offering virtual music lessons to offset the drop in sales, it wasn’t enough to keep it from filing for bankruptcy protection.
The company’s primary owner, Ares Management, as well as new equity investor Brigade Capital Management and a fund managed by Carlyle Group will help finance Guitar Center through the bankruptcy, the company said.
Guitar Center will continue to operate through its bankruptcy proceedings. It expects to complete the process by the end of the year.
More than a quarter of Americans – 28% – say they will spend less on holiday gifts this year compared with last year, according to a recent Gallup poll, marking the highest percentage Gallup has recorded in the category since 2012.