Nashville-based guitar maker files for bankruptcy protection

On Behalf of | May 4, 2018 | Bankruptcy |

Bankruptcy options exist to help both businesses and individuals struggling with the burden of debt. Nashville guitar maker Gibson filed for reorganization bankruptcy protection recently. Similar to Chapter 13 reorganization personal bankruptcy recently discussed on this blog, reorganization bankruptcy options are also available to struggling businesses seeking to address their debt concerns and return to profitability. Chapter 11 bankruptcy provides an option for struggling businesses to do just that.

The restructuring bankruptcy filing will allow Gibson to remain in business as lenders take control of the business. Gibson’s debts equal up to $5000 million and lenders will provide a new $135 million loan to keep the company in business. Gibson will be shedding the consumer electronics unit of its business blamed for much of its financial struggles. Commonly in circumstances of Chapter 11 bankruptcy, the struggling business remains in business during the bankruptcy process, potentially unburdening itself of unprofitable aspects of the business and seeking new capital or a sale of the business to help out.

The struggling guitar company has been seeking new sources of capital to refinance its debts and eliminate existing creditors. The company has sought recapitalization or sale options by approaching 58 businesses but did not have enough capital to pay down debt to be able to extend the amount of time it had to reach a recapitalization deal or deal to sell the company. There has also been some amount of controversy surrounding the company’s leadership.

For business and individuals alike struggling with debt, there are different bankruptcy options to consider that fall into two primary categories allowing for a liquidation bankruptcy, which, in the case of a business, would mean ending the business, or a reorganization bankruptcy. When facing financial challenges, it is important to thoroughly understand the different options available and how they can both protect and help the struggling party whatever their circumstances may be.

Source: Bloomberg, “Gibson Files for Bankruptcy in Deal to Renew Guitar Business,” Tiffany Kary, et al., May 1, 2018


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