Those who fear the death of rock & roll won't be happy to hear that Gibson Brands Inc, the maker of some of America's most epochal electric and acoustic guitars, has filed for bankruptcy.
The Nashville-based company announced Tuesday that it is filing for chapter 11 bankruptcy and working on "re-focusing, reorganizing and restructuring" – i.e., trying to find its way out of a pile of debt – by shedding some of its side businesses and concentrating on its original mission of selling musical instruments.
"Over the past 12 months, we have made substantial strides through an operational restructuring. We have sold non-core brands, increased earnings, and reduced working capital demands," said Gibson's CEO Henry Juszkiewicz in a statement.
Those "non-core brands" include an audio and home entertainment business that Gibson acquired for $135 million from multinational tech firm Phillips in 2014, in a bid to broaden the company's presence among music fans, which the company says will now "be wound down." According to a court filing from the management consulting firm that will assist the company's pivot, Gibson’s electronics business had been "trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales." The company will continue to operate during its reorientation and bankruptcy proceedings, thanks to agreements it has reached with shareholders and noteholders.
The writing was on the wall for the iconic guitar company, as its annual revenue fell nearly half a billion in the last three years. It has debts of between $100 million and $500 million and owes money to at least 26 other companies, including suppliers; import regulations on rosewood have hampered its business in the last few years, as has a dramatic fall in the sale of guitars overall. (Fender is also in debt. Leading instrument retailer Guitar Center is hanging by a string.)
But it's not all bad news. Gibson – which also owns and makes musical instruments under a number of other household brand names including Epiphone, Kramer, Steinberger, Dobro, and Baldwin – is still a juggernaut in its industry, and the company's renewed focus on its instruments business could allow it to explore fresh ways of appealing to music fans.
"The Gibson name is synonymous with quality and today's actions will allow future generations to experience the unrivaled sound, design and craftsmanship that our employees put into each Gibson product," Juszkiewicz said. Just how many future generations will be interested in learning to play, of course, is another matter.