Thanks, COVD-19: Guitar Center Might Be Headed Into Bankruptcy

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October 27, 2020 Topic: Economics Region: Americas Blog Brand: Techland Tags: Guitar CenterBankruptcy2020LockdownCoronavirusCOVID-19Recession

Thanks, COVD-19: Guitar Center Might Be Headed Into Bankruptcy

The company is facing a serious cash crunch.

Guitar Center is the largest brick-and-mortar retailer of musical instruments in the United States, with more than 250 stores, and a history that goes back to 1959. Guitar Center also owns Music & Arts, musician.com, guitarcenter.com and Private Reserve Guitars.

Like many retailers across the country, Guitar Center has been struggling during the pandemic. And a new report said that company is looking at its options for restructuring, including possible bankruptcy.

According to Bloomberg News, the company is facing a cash crunch, and failed to make some bond payments this month. Guitar Center is also, per the report, “in active talks with its creditors about reconstructing its debts which could see certain holders take control of the company.” Any possible bankruptcy, per Bloomberg, would be executed as part of a deal with its creditors to “support a restructuring plan that could swap debt for equity in the reorganized company.”

The company, after the missed bond payments, is operating on a thirty-day grace period that lasts through November.

After Guitar Center closed its stores due to the coronavirus pandemic in April, it reached a debt restructuring deal, in order to avoid default. The stores were reopened in July.

In 2014, private equity firm Ares Management took ownership of Guitar Center from previous owner Bain Capital, who had bought out the firm in 2007.

Guitar Center, despite its name, sells all kinds of musical instruments, not only guitars. But the chain does indeed sell a wide selection of guitars. Rolling Stone reported in 2018 that despite the long decline in the popularity of rock music, guitars were showing resilient popularity. That piece, which cited research firm IBISWorld, found that sales of guitars had shown five straight years of consecutive growth, and that that growth was expected to continue through at least 2022.

The good news for the guitar business is that during the pandemic, with lots of time on their hands, people are taking up the guitar, to the point where guitar sales are once again through the roof. According to a New York Times piece in September, sales of the instrument have been increasing, because “people are turning to the guitar as a quarantine companion and psychological salve.” The chief executive of another guitar company, Fender, telling the times that the company is looking at “the biggest year of sales volume in Fender history, record days of double-digit growth, e-commerce sales and beginner gear sales.”

The Times piece added guitars are becoming popular outside of traditional boomer male demographics, with young women, in particular taking up the instrument. That’s a phenomenon that’s been attributed in the past to the popularity of Taylor Swift. There’s also a mini-industry of guitar tutorial videos on YouTube.

Another famous guitar brand, Gibson Guitars, declared bankruptcy in 2018, following an ill-advised foray into the consumer electronics business. Gibson, now known as Gibson Brands, emerged from bankruptcy later that year and remains a going concern.

Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

Image: Reuters