WASHINGTON (dpa-AFX) - Guitar Center Inc., a retailer of musical instruments, lessons, repairs and rentals, has filed for Chapter 11 bankruptcy reorganization, aiming to significantly reduce its debt and continue its business amid ongoing struggles following the coronavirus pandemic.
The company, which operates nearly 300 stores across the U.S., expects to complete the process before the end of this year.
In its filing in the United States Bankruptcy Court of the Eastern District of Virginia, the company said it received up to $165 million in new equity investments, while lenders agreed to reduce its debt by nearly $800 million.
The new financing is to implement its financial restructuring plan, which is supported by its equity sponsor, a fund managed by the Private Equity Group of Ares Management Corp. The new equity investors are Brigade Capital Management and a fund managed by The Carlyle Group, and the plan is backed by supermajorities of the company's noteholder groups.
Guitar Center has negotiated to have a total of $375 million in Debtor-In-Possession financing provided by certain of its existing noteholders and ABL lenders. The company currently intends to raise $335 million in new senior secured notes.
During the restructuring process, the retailer and its related brands, including Music & Arts, Musician's Friend, Woodwind Brasswind and AVDG, will continue to stay in business.
Guitar Center will also continue to meet its financial obligations to vendors, suppliers and employees, and intends to make payments in full to these parties without interruption in the ordinary course of business.
Like many other retailers, Guitar Center also faced severe business loss amid the worsening coronavirus pandemic and related lockdowns across the nation. The company reportedly closed many of its stores in March.
Guitar Center now said it has engaged A&G to explore opportunities to optimize its real estate portfolio and other agreements to focus on investments that best position it to return to its growth trajectory prior to COVID-19.
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.'
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