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Guitar Center Possible Bankruptcy (yet again)

Discussion in 'Bad Dog Cafe' started by warrent, Oct 26, 2020.

  1. warrent

    warrent Friend of Leo's

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    It's that time of year again

    Guitar Center is preparing for a possible bankruptcy filing.
    [​IMG]
    By Lauren Hirsch



    Guitar Center has begun to prepare for a potential bankruptcy filing that could come as soon as next month, people with knowledge of the situation said. The retailer missed an interest payment of roughly $45 million earlier this month, setting off a 30-day grace period that could end in default, the people said.

    The country’s largest retailer of musical instruments has reached out to creditors to discuss a plan that would involve the company filing for bankruptcy this year and emerging from it in early 2021, said the people, who requested anonymity because the talks are confidential. A spokesperson for Guitar Center did not respond to a request for comment.

    It’s still possible that Guitar Center could avert bankruptcy, as it did earlier this year when it resolved a skipped interest payment in April with a distressed debt exchange. That led to a downgrade by the credit ratings agency Moody’s in May, which noted that the transaction did not “fundamentally change” the company’s “untenable” capital structure. It was the third cut in the company’s credit rating this year.

    Guitar Center, whose roots go back to 1959, has nearly 300 stores nationwide. It is owned by private equity firm Ares Management, which acquired a majority stake in 2014 by converting some of the debt it owned in the retailer into equity. The retailer generated about $2.3 billion in sales its most recent fiscal year, according to Moody’s. It has about $1.3 billion in debt. Ares declined to comment.

    J. Crew, Neiman Marcus and J.C. Penney, which were unable to withstand the impact of the downturn during the pandemic. Some, like Neiman Marcus, have already emerged from bankruptcy protection.

    @laurenshirsch
     
  2. 8barlouie

    8barlouie Friend of Leo's Gold Supporter

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    I guess I had better get busy and buy that one black lefty Player Telecaster they have in a remote, dusty corner of the store right next to the left over lefty 2012 Sunburst Mexican Strat. NOT!
     
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  3. Mike Eskimo

    Mike Eskimo Telefied Ad Free Member

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    An interest payment of $45 million ! :lol:
     
  4. 68tele

    68tele Friend of Leo's Silver Supporter

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    Honestly...WGAF?
     
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  5. Jakedog

    Jakedog Doctor of Teleocity Ad Free Member

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    It will make no difference. They will not go away. They will not close. It will be a restructuring, possibly new CEO, etc. Then back to business as usual.
     
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  6. unixfish

    unixfish Doctor of Teleocity Silver Supporter

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    Hey - that is my favorite radio station! :lol::lol::lol:
     
  7. Paulie_Boy

    Paulie_Boy Tele-Holic Silver Supporter

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    I wish they had private, sound proof rooms for testing gear. Walking into a GC is an assault on my ears, so I avoid them.
     
  8. barrymclark

    barrymclark Tele-Meister

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    Not all that surprising. Regardless of what someone's (read: my) opinion of GC is, the reality is that this is a BRUTAL time for brick & mortar music stores. Companies like Sweetwater are doing exceedingly well because of their ridiculously strong online game. Now that it seems the age of the world-famous rock star that influences millions to at least try guitar is gone (and may never come back... not to say there aren't GREAT musicians), a company's ability to survive will hinge nearly exclusively on their online strength. Sweetwater's online presence is ENORMOUS compared to its actual store. Guitar Center has its online store as well as Musician's Friend but that is still leveraged against a HUGE number of stores to support.
     
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  9. Paulie_Boy

    Paulie_Boy Tele-Holic Silver Supporter

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    I prefer WJAZ. Jazz and conversation from the foot of Mount Balzonie. :twisted:
     
    Last edited: Oct 26, 2020
  10. brookdalebill

    brookdalebill Tele Axpert Ad Free Member

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    We’ll see.
    They sure have changed.
    I did a 9 month tour of duty with them in 04.
    They were hoppin’ here then.
    I haven’t bought anything from them in many years.
    I did not enjoy my tour, either.
    They were easily the worst outfit I ever worked for.
    They treat their employees terribly.
    Like my Newfie Mom would sometime say,
    “Divil (devil) take em’”
     
  11. DrPepper

    DrPepper Friend of Leo's Ad Free Member

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    Airplanes crash every time they land... landing an airplane is a controlled crash...
     
  12. Marc Morfei

    Marc Morfei Friend of Leo's Silver Supporter

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    I thought I read recently that this was a record year for guitar sales. Lessee....yep:

    https://www.nytimes.com/2020/09/08/style/guitar-sales-fender-gibson.html
    https://www.guitarworld.com/news/fe...rs-in-2020-than-any-other-year-in-its-history

    How can you go out of business during a time of record sales? I suppose it's because stores were closed for a period, or operating at reduced capacity. But people are buying all those guitars somewhere. I'm pretty sure GC has a web site. Not to mention Musician's Friend. Someone is making money selling guitars.
     
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  13. archetype

    archetype Fiend of Leo's

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    If they do a debt exchange, their credit rating will go down, yet again. That will increase the % of interest they pay on any restructured debt. They can't come up with the money to make payments against just the interest right now: they aren't making payments against the principal, at all.

    Their financial structure doesn't and can't sustain the business, no matter how many bandages they apply. This isn't anyone's opinion, it's just the fundamentals that agencies like Moody's look at. Simple 4-function math tells the story.
     
    Last edited: Oct 26, 2020
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  14. Average_Joe

    Average_Joe Tele-Holic

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  15. ping-ping-clicka

    ping-ping-clicka Friend of Leo's Ad Free Member

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    well, not to pick up the poison pen as a former disgruntled might be tempted to do.....
     
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  16. scooteraz

    scooteraz Friend of Leo's

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    Uhhh, no

    Defintions of crash for airplane form Merriam Webster

    The point of a controlled landing is to NOT damage the aircraft. While it is a cute metaphor to say that Naval aircraft survive a controlled crash on every landing, that is not strictly true. They do land with a vertical velocity that would damage many land based aircraft, they are designed for that, so it is not a crash. It is a firm landing.

    Here, trying to imply that after every crash there is a subsequent flight is wrong as even a metaphor for the idea that GC will definitely “fly” again after their crash. At some point they will no longer be too big to fail; see Sears.
     
  17. Ron C

    Ron C Tele-Meister

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    What's so disappointing about this is the likely impact to their suppliers. Guitar Center will probably re-emerge from this just fine, but Chapter 11 bankruptcy means that the invoices that Martin, Fender, Schecter, pedal companies, the building owners, etc. etc. that have gone unpaid probably will never get paid, certainly not in full.

    If you know anyone who runs a small to medium size business that got burned when the big shot customer went Chapter 11, you know how much this can hurt.
     
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  18. Strebs

    Strebs Tele-Meister

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    Guitar Center was doomed the minute Bain Capital bought them and saddled them with $1.6 Billion in debt.

    It's a shame. They put out most of the small music shops and then were doomed by private equity that bled them.

    At least there's Reverb and some online retailers.
     
  19. Paulie_Boy

    Paulie_Boy Tele-Holic Silver Supporter

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    Thank you for your service. Welcome home.
     
  20. Jakedog

    Jakedog Doctor of Teleocity Ad Free Member

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    This is not entirely true. All the small brick and mortar “mom and pop” music stores that I know and frequent are having a record breaking year. One in particular claims it’s bigger than the previous eight years they’ve been in business. Combined.

    I know of another small shop that has sold out of every guitar shipment they’ve gotten this year over the weekend after they arrive. They’re in a very sparsely populated rural area.

    What’s hurting GC isn’t sales. It’s ridiculously poor management. They did 2.3 billion in sales last year. But with 1.3 billion in debt and ownership that has no interest in doing anything other than milking it dry and ditching it, this is what you get.
     
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