Guitar Center Files for Chapter 11 Bankruptcy Protection, Hires A&G to Evaluate Store Footprint

Westlake Village, Calif. — Musical instrument retailer Guitar Center has filed for Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court for the Eastern District of Virginia. The Westlake Village-based company did not announce plans to close any of its 297 stores, but it has retained A&G Real Estate Partners to explore opportunities for its real estate portfolio.

In court filings, Guitar Center cited its business of instrument purchases, rentals, repairs and music lessons suffered amid the upheaval stemming from government-mandated shutdowns in response to the COVID-19 pandemic, according to The New York Times. Approximately 75 percent of its stores were shuttered at one point in the spring. Additionally, the company cited its “significant debt burden” in the court filings.

In addition to Guitar Center stores, the company operates four sister brands: Music & Arts, Musician’s Friend, Woodwind & Brasswind and AVDG.

Music & Arts, a Maryland-based chain that Guitar Center acquired in 2005, operates 200 stores and 300 affiliate locations that provide band and orchestra instruments and equipment for sale or rentals.

Musician’s Friend, which Guitar Center acquired in 1999, is a direct marketer of musical instruments.

Likewise Woodwind & Brasswind is a catalog musical instrument merchant with a call center in Indianapolis and a warehouse in Kansas City, Missouri. The brand’s lone brick and mortar location in South Bend, Indiana, closed in 2011. Guitar Center acquired Woodwind & Brasswind in 2007.

AVDG is a Bay Area-based designer and installer of audio-visual systems for residential and commercial clients. Founded in 1996, AVDG served as part of Guitar Center’s Business Solutions Group since being acquired in 2018.

Guitar Center’s stores, Music & Arts stores and online platforms will remain operational throughout the restructuring process. Additionally, Guitar Center plans to continue to meet its financial obligations to vendors, suppliers and employees, and intends to make payments in full to these parties without interruption in the ordinary course of business.

Prior to the Chapter 11 filing, Guitar Center secured new equity totaling $165 million from its private equity ownership, Ares Management Corp., as well as funds managed by Brigade Capital Management and The Carlyle Group. Other parties involved in the equity investment include supermajorities of Guitar Center’s noteholder groups.

Guitar Center has also negotiated $375 million in debtor-in-possession financing from some of its noteholders and asset-based lenders.

Guitar Center expects the recent moves will reduce its debt load by nearly $800 million. Additionally, Guitar Center has retained UBS Investment Bank to help the retailer raise $335 million in new senior secured notes.

“This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth,” says Ron Japinga, CEO of Guitar Center. “Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”

Milbank LLP is serving as legal counsel to Guitar Center, and BRG is serving as restructuring advisor. Houlihan Lokey is serving as the company’s financial advisor.

Stroock & Stroock & Lavan LLP is serving as legal counsel to an ad hoc group of secured noteholders, and Province is serving as financial advisor.

Kirkland & Ellis LLP is serving as legal counsel to Ares Management.

Debevoise & Plimpton LLP is serving as legal counsel to Brigade Capital, and GLC Advisors & Co. is serving as the firm’s financial advisor.

Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel to Carlyle Group.

— John Nelson

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