I know this article will strike a “chord” with a lot of my friends. But, it would appear that Gibson Brands, makers of Gibson and Les Paul guitars, has a lot to “fret” about. Ok, I’ll stop. Seriously though, it does appear that Gibson Brands is on the brink of bankruptcy.
How Did This Happen?
According to numerous articles, including CNBC, the Nashville, TN based guitar company is drowning in debt. Bill Lawrence, the company’s former Chief Financial Officer, abruptly left Gibson six months ago. Now Gibson has $375 million in senior notes that are maturing, with another $145 million in bank loans due and payable in July.
The company, which generates gross sales exceeding $1 billion annually, is considering Chapter 11 bankruptcy as one option to help it restructure its debt. According to the Nashville Post, owner Henry Juskiewicz is trying to restructure the company, but has been caught in a battle with creditors regarding bad business decisions.
To make matters worse, Standard & Poor’s (S&P), downgraded Gibson over concerns that it may default on its debt. On Wednesday, February 21, 2018, S&P lowered Gibson’s rating to CCC-minus. A CCC-minus rating indicates that S&P believes a default is imminent.
Gibson, along with other guitar makers, is dealing with an industry wide problem concerning the import and export of Rosewood, a critical component in the manufacture of high-end guitars.
Gibson’s Background
Gibson was founded in Kalamazoo, Michigan more than 115 years ago by Orville Gibson. In 1952, guitar legend Les Paul partnered with Gibson to create the Gibson Les Paul. This partnership forever changed the face and future of Rock & Roll music. Nearly every musician/band has used the Gibson Les Paul. The Beatles, Pink Floyd, AC/DC, Led Zeppelin, The Who, Guns N’ Roses, Ozzy Osbourne, Aerosmith and countless others have all molded their sound using the Gibson Less Paul.
My sincere hope is that Gibson finds a way to restructure its debt and avoid bankruptcy and possible liquidation. To see such an iconic and influential company go away would truly be heartbreaking.
For articles regarding the export of India Rosewood and its impact on guitar makers, see:
Guitar Industry Grapples with Trade Restrictions on Rosewood