×
You will be redirected back to your article in seconds

Gibson, Iconic Guitar Company, Said to Be Nearing Bankruptcy

Gibson Brands Inc., one of the two most iconic guitar companies in music history, is facing bankruptcy after years of challenges, according to a report in the Nashville Post and other sources.

The Post reports that the company, which has annual revenues of more than $1 billion, is less than six months away from $375 million of senior secured notes reaching maturity; another $145 million in bank loans will be due immediately if those notes, issued in 2013, are not refinanced by July 23. The company’s chief financial officer, Bill Lawrence, recently departed after just six month in the role; the company also moved out of its Nashville offices, from which it had operated since moving to the city from Kalamazoo, Michigan in the 1980s.

Gibson issued a statement Thursday, several days after the Post report published, in which it says that it “has met all current obligations to the bondholders, is in the process of arranging a new credit facility to replace the bonds, and fully expects the bonds to be refinanced in the ordinary course of business.” In the statement, longtime owner and CEO Henry Juszkiewicz (pictured above) said, “These bonds expire as all fixed income instruments do at the end of their term” and noted that the company has been working with Jefferies investment bank to manage the refinancing process. “While the musical instrument and pro audio segments have been profitable and growing, they are still below the level of success we saw several years ago.”

The company’s statement also included an indirect quote from Juskiewicz: “He said that the company continues to streamline and focus its Philips brand consumer audio business on those products that have greater growth potential, as well as eliminating product segments that do not perform to our expectations and have little upside in the future. Gibson expects this strategy will lead to the best financial results the company has seen in its history within the next year, and an ability to pay back the company’s debt in whole within several years.” A rep for the company did not immediately respond to Variety’s request for comment.

The Post cites insiders as saying the company faces bleak prospects for an orderly refinancing, and possibly even bleaker ones for Juszkiewicz. Kevin Cassidy, a senior credit officer at Moody’s Investors Service, told the Post that Juszkiewicz could negotiate an exchange of their debt coming due for new notes; give up some of his equity in exchange for debt payments; or go to bankruptcy court. “This year is critical and they are running out of time — rapidly,” Cassidy said. “And if this ends in bankruptcy, he will give up the entire company.”

The company is in the process of selling various real estate holdings, although those are not expected to bring anywhere near the funds required to right the ship.

Insiders say the company, which was founded by Orville Gibson in 1902, has been struggling for several years under the leadership of Juskiewicz, who has been pursuing other revenue streams, including electronic companies it has purchased, as guitar sales have fallen over the past decade.

The company’s struggles may initially come as a surprise to observers who see vintage Gibsons selling for six figures on instrument sites — indeed, a 1960 Gibson Les Paul Standard could be yours today for a cool $595,000  — yet the company sees little material benefit from the sale of second-hand items and its newer models have not been widely successful. Conversely, its main competitor, Fender, has kept itself above water by introducing budget lines in recent years, a move Gibson only recently embraced.

The company has been synonymous with rock and roll since the 1950s with its models — the most popular include the Les Paul, the SG, the Firebird and several semi-acoustic lines — being used by virtually every iconic guitar hero, from Chuck Berry and B.B. King to Jimmy Page and Eric Clapton and Duane Allman to Slash and Johnny Marr to Gary Clarke Jr. Yet as rock music has fallen from mainstream popularity so have the guitar sales that form the bulk of Gibson’s business.

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

More Music

  • Concert Review: Yoko Ono Saluted By

    Concert Review: Yoko Ono Earns a Wide-Ranging, All-Female Salute at Disney Hall

    Yoko One was — is — nothing if not an artist of many facets, as someone who started out in the most avant-garde corners of the visual and performance art worlds and ended up having a flair for conventional pop songwriting. Both sides, the disrupter and the sentimentalist, were celebrated in a wide-ranging tribute concert [...]

  • NF_D_JGN-D6-2160.cr2

    Film Review: 'The Dirt'

    A long time ago, the words sex, drugs, and rock ‘n’ roll carried a hint of danger. The lifestyle did, too, but I’m talking about the phrase. It used to sound cool (back around the time the word “cool” sounded cool). But sex, drugs, and rock ‘n’ roll has long since passed into the realm [...]

  • James Newton Howard Danny Elfman

    New Trend in Concert Halls: Original Music by Movie Composers — No Film Required

    Movie and TV composers are in greater demand than ever for, surprisingly, new music for the concert hall. For decades, concert commissions for film composers were few and far between. The increasing popularity of John Williams’ film music, and his visibility as conductor of the Boston Pops in the 1980s and ’90s, led to his [...]

  • Jonathan Lamy RIAA

    Jonathan Lamy Stepping Down From RIAA

    Jonathan Lamy, the Recording Industry Association of America’s longtime executive VP of communications and marketing, is stepping down from his post after 17 years, he announced today. As he put it in an email to Variety, “I started back in 2002, which means it’s been 17+ years, four different RIAA CEOs, three format changes and [...]

  • Suzi Quatro

    Suzi Quatro on Being a Pioneering Female Rocker: 'Women Have Balls!'

    For Suzi Quatro, portraying intimidating rocker chick Leather Tuscadero on the 1970s sitcom “Happy Days” was art imitating life. A veteran musician who came up in the rough and tumble rock scene of 1960s Detroit, her tough-but-sexy small-screen persona wasn’t an act, and it’s served Quatro well in her pioneering role as arguably the first [...]

More From Our Brands

Access exclusive content