As announced on Nov. 13, Guitar Center has secured new financing to implement its financial restructuring plan, which is supported by its equity sponsor, a fund managed by the Private Equity Group of Ares Management Corporation, new equity investors Brigade Capital Management and a fund managed by The Carlyle Group, as well as supermajorities of its noteholder groups. The Plan provides for a comprehensive transaction that will deleverage the Company’s balance sheet, enhance financial flexibility and provide additional liquidity to continue to support its vendors, suppliers, and employees.
The Plan will reduce debt by nearly $800 million and is supported by up to $165 million in new equity investments from a fund managed by the Private Equity Group of Ares Management Corporation, a fund managed by the Carlyle Group and Brigade Capital Management. Guitar Center has negotiated to have a total of $375 million in Debtor-In-Possession (“DIP”) financing provided by certain of its existing noteholders and ABL lenders. In connection with the Plan, the Company currently intends to raise $335 million in new senior secured notes. UBS Investment Bank will serve as the lead placement agent in connection with this effort. The move is intended to allow Guitar Center and its related brands (including Music & Arts, Musician’s Friend, Woodwind Brasswind and AVDG) to continue normal operations while the transaction is implemented.
Guitar Center has been in business for over 60 years, but was forced to close many locations in March during the COVID-19 lockdowns across the nation, and struggled to keep sales up as the economy tanked during the pandemic.
Ron Japinga, CEO of Guitar Center, said, “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. Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”
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