Guitar Center, the largest US retailer of music instruments and equipment, filed for bankruptcy after the coronavirus pandemic kept customers at home and job losses made them less able to afford new gear.
The filing in the Eastern District of Virginia gives the company a break on its debts by letting it stay in business as it seeks to carry out a restructuring plan. A turnaround will be complicated by the fact that the company’s stores were shut in mid-March to help stop the spread of the Covid-19 outbreak. It has reopened locations while maintaining e-commerce operations.
A restructuring support agreement that Guitar Center announced on November 13 calls for new financing backed by existing creditors as well as $165 million in new equity investments from its private equity owner, Ares Management Corporation, and Carlyle Group and Brigade Capital Management.
Guitar Center, based Westlake Village, California, has around 300 stores across the US. Sister brands include Music & Arts, with more than 200 stores specialising in band and orchestral instruments for sale and rent.
The coronavirus shutdown has hit non-essential retailers hard, and Guitar Center was vulnerable because purchases of musical instruments are highly discretionary, according to a report by Moody’s Investors Service. The pandemic has cost tens of millions of Americans their jobs, and many who are still employed have seen their pay cut substantially.
The filings add to a list of retailers that have sought Chapter 11 court protection amid ongoing pressures from Covid-19 and changing consumer tastes. J Crew, Neiman Marcus and JC Penney filed for bankruptcy toward the beginning of the pandemic, unable to withstand the impact of temporary store closures and lost sales.
Guitar Center’s bankruptcy will reduce its debt load by roughly $800m and provide additional financing so the company can continue paying its vendors, suppliers and employees, the company said in a statement. It also negotiated a $375m debtor-in-possession loan provided by existing noteholders and lenders. Restructuring plans call for $335m in new senior secured notes arranged by UBS.
Guitar Center listed liabilities of $1 billion to $10bn, with a similar range for its assets, according to the filing. It expects to emerge from bankruptcy by the end of the year and employs about 13,000 people, filings show.
Before the pandemic, the company posted over 10 quarters of sales growth through to February, chief executive Ron Japinga wrote in a court declaration. Covid-19 “wiped out” much of that progress, he said.
Guitar Center faced a “significant debt burden and upcoming maturities” on top of the pressures from the pandemic, which could not be resolved through “short-term measures”, Mr Japinga said. It brought in A&G Realty Partners to optimise its real estate portfolio and other agreements to focus on investments.
Department stores and speciality shops were already under pressure before the pandemic due to competition from online behemoths like Amazon and falling foot traffic at shopping centres.
Guitar Center has diversified by offering in-store repairs and music lessons, which continued online through the shutdown via videoconferencing services.
Ares gained control of the company in 2014 through an out-of-court restructuring of Guitar Center’s borrowings. Its heavy debt load and financial pressures date back to a 2007 deal by Bain Capital to take it private for $2.1bn.
Suggested picnic spots
Abu Dhabi
Umm Al Emarat Park
Yas Gateway Park
Delma Park
Al Bateen beach
Saadiyaat beach
The Corniche
Zayed Sports City
Dubai
Kite Beach
Zabeel Park
Al Nahda Pond Park
Mushrif Park
Safa Park
Al Mamzar Beach Park
Al Qudrah Lakes
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
The%20BaaS%20ecosystem
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Results:
6.30pm: Al Maktoum Challenge Round-2 (PA) | Group 1 US$75,000 (Dirt) | 2,200 metres
Winner: Goshawke, Fernando Jara (jockey), Ali Rashid Al Raihe (trainer)
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Winner: Silva, Oisin Murphy, Pia Brendt
7.40pm: Meydan Classic Trial (TB) | Conditions $100,000 (Turf) | 1,400m
Winner: Golden Jaguar, Connor Beasley, Ahmad bin Harmash
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Winner: Drafted, Pat Dobbs, Doug Watson
8.50pm: Handicap (TB) | $175,000 (D) | 1,600m
Winner: Capezzano, Mickael Barzalona, Sandeep Jadhav
9.25pm: Handicap (TB) | $175,000 (T) | 2,000m
Winner: Oasis Charm, William Buick, Charlie Appleby
10pm: Handicap (TB) | $135,000 (T) | 1,600m
Winner: Escalator, Christopher Hayes, Charlie Fellowes
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What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
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Jawan
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What is graphene?
Graphene is a single layer of carbon atoms arranged like honeycomb.
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were "playing about" with sticky tape and graphite - the material used as "lead" in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But as they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment had led to graphene being isolated for the very first time.
At the time, many believed it was impossible for such thin crystalline materials to be stable. But examined under a microscope, the material remained stable, and when tested was found to have incredible properties.
It is many times times stronger than steel, yet incredibly lightweight and flexible. It is electrically and thermally conductive but also transparent. The world's first 2D material, it is one million times thinner than the diameter of a single human hair.
But the 'sticky tape' method would not work on an industrial scale. Since then, scientists have been working on manufacturing graphene, to make use of its incredible properties.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. Their discovery meant physicists could study a new class of two-dimensional materials with unique properties.
The Baghdad Clock
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Hobbies: Travelling, going to the gym
Inspiration: Father, who was a captain in the UAE army
Favourite read: Rich Dad Poor Dad by Robert Kiyosaki and Sharon Lechter
Favourite film: The Founder, about the establishment of McDonald's
yallacompare profile
Date of launch: 2014
Founder: Jon Richards, founder and chief executive; Samer Chebab, co-founder and chief operating officer, and Jonathan Rawlings, co-founder and chief financial officer
Based: Media City, Dubai
Sector: Financial services
Size: 120 employees
Investors: 2014: $500,000 in a seed round led by Mulverhill Associates; 2015: $3m in Series A funding led by STC Ventures (managed by Iris Capital), Wamda and Dubai Silicon Oasis Authority; 2019: $8m in Series B funding with the same investors as Series A along with Precinct Partners, Saned and Argo Ventures (the VC arm of multinational insurer Argo Group)
