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ICONIC Guitar Maker Gibson Files for Bankruptcy…

Gibson Brands Inc. filed for bankruptcy with a turnaround plan that gives some of the company’s lenders equity ownership of the iconic American business that’s supplied guitars to B.B. King, Elvis Presley and Pete Townshend.

Support from senior secured noteholders will help Gibson repay bank loans while going through a “change of control” transaction, according to papers filed Tuesday with its Chapter 11 bankruptcy in Delaware. The petition shows the company owes as much as $500 million and that lenders will provide a new loan of up to $135 million to keep Gibson in business.

The change in control will give noteholders equity in a new company, replacing current stockholders such as Chief Executive Officer Henry Juszkiewicz. According to court filings, current noteholders include Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors. The restructuring will also allow the instrument business to “unburden” itself of a consumer-electronics unit that Gibson blamed for its financial woes.

Leadership Plan

Juszkiewicz, who has found himself at odds with creditors in recent months, will continue with the company upon emergence from bankruptcy “to facilitate a smooth transition,” according to the agreement. Court papers call for a one-year consulting deal and compensation package for Juszkiewicz. A representative for the company didn’t immediately respond to questions about whether Juszkiewicz will remain as CEO or in a separate role.

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