THE LARGEST MUSICAL INSTRUMENT RETAILER IN THE US HAS FILED FOR BANKRUPTCY

The largest musical instrument retailer in the US declared bankruptcy. Guitar Center reported a drop in sales due to the social impact of the coronavirus crisis. Given that the retailer's stores were closed at the beginning of the pandemic, restructuring could be a daunting process.

It is known that the Guitar Center company has existed since 1959. It was originally called Organ Center, then The Vox Center, and in the 70s, it acquired its modern name. The company not only sells and rents musical instruments, but also conducts lessons for musicians of all ages and skill levels, and also renders services for the repair of musical equipment.

Guitar Center reports that business representatives have reached an agreement with investors and creditors, which will raise additional financial capital of $ 165 million.

These actions could reduce the company’s debt by almost $ 800 million. 

The main source of comprehensive support and financing will be a fund managed by the private investment company Ares Management Corp. It is the main shareholder of Guitar Center since 2014. Financial support is also expected from Carlyle Group and Brigade Capital Management. 

Experts note that after filing an application for restructuring in the Eastern District Court of Virginia, the company will be able to get the necessary deferral in paying debts, which will allow it to stay afloat, getting rid of some of the accumulated debts.
The representatives of the Guitar Center brand, which operates 269 stores in the United States, stated that the future restructuring would not affect operations. All financial obligations to sellers, suppliers and employees will continue to be paid in full.

The brand has faced financial problems even before the pandemic.

For example, in 2015, the company was forced to get rid of 180 employees, having a debt of more than $ 1 billion. In the spring of 2018, Standard & Poor's financial service also downgraded the company's rating to negative, expecting a possible bankruptcy. This year the situation has changed dramatically.
Experts draw attention to the fact that the pandemic has led to an unprecedented increase in online sales of entertainment and educational goods in the United States, including musical instruments and equipment for aspiring musicians. A number of manufacturers (such as Gibson) did not even have time to release products to meet the increased demand by the middle of the year.

Guitar Center operates one of the most popular American e-commerce websites.

Despite this, the pandemic negatively affected the company's trade balance. The fact is that the business strategy adopted by the company was based on the functioning of numerous offline stores that were closed during the lockdown period. The growth of online purchases, experts say, will not be able to cover the losses from the decline in sales in offline outlets.