Gibson Brands Goes Belly Up Implications Locally
Gibson Brands is out of the commercial consumer electronics business after the US Company filed for bankruptcy protection overnight, retailers are tipped to strip Philips and Pioneer product from their stores in Australia.
The move is set to hit Adelaide based distributor Powermove who had the local rights to sell both Philips and Pioneer products supplied by Gibson brands.
ChannelNews understands that companies that are owed over $500M have now taken control of the US music Company. A key contributor was the failure of Gibson Brands, to get credit insurance resulting in manufacturers refusing to make their consumer electronics products.
The Gibson Innovations business, which sells audio products like speakers, headphones, and DJ products branded Philips or Pioneer, was the source of its financial woes, according to a court statement from Brian J. Fox, a managing director at Alvarez & Marsal who will serve as the company’s chief restructuring officer.
Acquired through a leveraged transaction, the business faced significant sales declines due in part to a loss of credit insurance overseas.
Also, out is Gibson Brands CEO Henry Juszkiewicz, who has run the Company for more than three decades.
Juszkiewicz bought the audio and home entertainment business from Philips in June 2014 for $135 million as part of a bid to relaunch Gibson Guitars as Gibson Brands, a “music lifestyle” company.
He also bought into Japanese company Onkyo whose products are distributed by Ambertech.
The investment drained cash, and earnings plunged. The company ran out of time for a turnaround as a bond maturity and springing term loan loomed in July.
The Chapter 11 filing revealed that the lenders Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors are now in control and that they have no appetite for consumer electronic products which several analysts claims was the “root cause” for bringing the iconic Company down.
Gibson owes as much as $500 million, and lenders will provide a new loan of up to $135 million to keep the company in business, according to court papers.
Bloomberg said that Juszkiewicz, who has found himself at odds with creditors in recent months, will continue with the company upon emergence from bankruptcy “to facilitate a smooth transition,” according to the agreement.
Court papers call for a one-year consulting deal and compensation package for Juszkiewicz.
Working with Jefferies LLC, the company has over the past 12 months sought to sell or recapitalise the business this resulted in 58 businesses expressing an interest 27 signed non-disclosure agreements.
Gibson, founded in 1894, sells over 170,000 guitars annually in 80 countries. In Australia the musical instruments business generates approximately $12M dollars in sales.
Its guitars are U.S.-made, with factories in Nashville and Memphis, Tennessee, and Bozeman, Montana. It also sells studio monitors, headphones, turntables and other musical instruments. Units also include the company’s Baldwin Piano business. All told, the music instruments business employs at least 875 people, according to court papers.