Debt Troubles Reported for Gibson, Juszkiewicz Responds

It has recently been reported by many that Gibson Brands, Inc. – parent company of Gibson Guitars – is facing an uncertain future due to serious debt-related and operational concerns. The company has issued a statement regarding their financial situation and, further, MMR spoke with Gibson Chairman and CEO Henry Juszkiewicz on the afternoon of February 20.

The company must soon address upcoming repayments of senior secured notes totaling $375 million, with an additional $145 million due if the first amount is not resolved by July 23. In early February, Debtwire reporter Reshimi Basu told The Nashville Post, “At the end of the day, someone will take control of this company – be it the debtors or the bondholders.” Further Kevin Cassidy, a senior credit officer at Moody’s Investment Service, noted to the Post that Henry Juszkiewicz, “essentially has just three options: He and his team could negotiate an exchange of their debt coming due with new notes, which may not be feasible at a reasonable price; He could also be persuaded – or forced – to give up some of his equity in exchange for the debt payments; or he may end up taking one of the most globally recognized brands… to bankruptcy court.”

“Pretty much, what we said in our press release holds true,” Juszkiewicz told MMR today. “The music side of the business is doing very well, we are growing. We just released a relatively good quarter for both sides of the business. The MI side of the business, which includes Pro Audio, is doing well, is very profitable, and we have very high expectations for that segment of the business going into next year. In general, the MI industry is ticking upwards as much as a mature industry does, so we have a tailwind and our business is doing well in that area. The word ‘bankruptcy’ gets tossed around, and it’s very exciting to hear that word, and it’s all [presented as being] dismal. The fact is, if we don’t replace the bonds, that’s the outcome. But that’s sort of like saying, ‘If you get hit by a train, you will die.’ That is absolutely possible, but it’s unlikely, right? We are, in fact, working with an investment bank, they feel highly confident that we can replace that financing, and we’re on the case. It’s just a question of getting the best terms and conditions in refinancing the business.”

The past few months have been notable for Gibson Brands – which has annual revenues of more than $1 billion – in a number of ways: Last summer, the company’s debt rating was downgraded; after less than a year on the job CFO Bill Lawrence left recently; Gibson sold a former Baldwin Piano warehouse in Nashville; in late October of 2017 the company announced that its Memphis-based guitar manufacturing division would move to a new facility; and in January Gibson was a notable no-show at the NAMM Show in Anaheim, California.

“This year is critical and they are running out of time,” Cassidy told the Post. Some type of restructuring will be necessary. The core business is a very stable business, and a sustainable one. But you have a balance sheet problem and an operational problem.”