Guitar Center has missed the October installment of a massive $45 million interest payment and may be heading toward bankruptcy, reports announced.
The New York Times alleges that Guitar Center has been meeting with creditors to discuss a potential bankruptcy reorganization. The plan being considered would have the troubled music instrument retailer emerging from bankruptcy in “early 2021.”
Despite a reported 10 straight quarters of sales growth, Guitar Center has been drowning in debt since the vulture capitalists of Bain Capital organized a $1.9 billion leveraged buyout of the company June of 2007. Lead by Goldman Sachs (now headed by reputed DJ David Solomon), the leveraged buyout heaped a ton of debt on the company which it’s never really recovered from.
In 2013, Standard & Poor’s cut Guitar Center’s debt rating to “junk bond” status. Rival credit agency Moodys has cut Guitar Center’s credit rating three times in the last year alone.
The company, which currently has some 269 locations and an estimated 10,000 employees, was purchased from Bain by private equity firm Ares Management in 2014 after converting its debt into equity.
Guitar Center previously settled a missed interest payment in April with a distressed debt exchange — one of the triggers for a Moody’s downgrade. After the settlement, Moodys noted that Guitar Center’s debt situation was “untenable.”