EXCLUSIVE: Onkyo Cuts Ties With Gibson Brands, Philips Supply Chain Falters
Japanese sound Company Onkyo has pulled the plug on the struggling US Company Gibson Brands according to sources at the Hong Kong Fair.
Two major global retailers have also told ChannelNews that supply, and demand of Philips headphones is now becoming “difficult” as Gibson Brands a US Company struggles to raise close to $500M to refinance current debt levels.
A major European retailer said “We are concerned we are actually looking at replacement brands as supply of Philips products have become unstable”.
Recently the struggling parent company of Gibson Guitars “engaged in negotiations” with KKR Credit Advisors only to see this deal fall over after lengthy negotiations.
The deal if it had gone ahead would have reduced the company’s debt load through a debt-to equity-conversion.
Company CEO Henry Juszkiewicz faces a July deadline to refinance at least US $375 million of debt.
Recent talks between Juszkiewicz and Gibson President (and minority shareholder) David Berryman on one side and KKR Credit Advisors on the other took place from March 15 and March 28 and focused on a potential debt-for-equity swap that would have put KKR in control of Gibson, which has about $1 billion in annual revenues but has run into trouble in recent years.
In Australia Gibson Brands generates approximately $12M in revenue a year from the sale of musical instruments but this is declining.
after spending big to expand into electronics. The talks foundered over the parties’ “significantly divergent” opinions on how much Juszkiewicz and Berryman should be paid for their stakes.
Gibson’s acknowledgement late last week of the KKR talks was a talking point at the Hong Kong Fair with distributors and retailers trying to work out who will end up owning the rights to the Philips audio range.
Until now, the Gibson Brands CEO has steadfastly maintained that he will be able to find new funding to pay off holders of the $375 million of senior secured notes it took out in 2013 — more than $100 million in bank loans also will come due if those notes aren’t refinanced by late July — and said that disgruntled bond investors are out to take over the company, not be repaid.
KKR Credit Advisors is part of Kohlberg Kravis Roberts, which, the New York Times recently reported, is one of Gibson’s bondholders.
Financial analysts and other observers have repeatedly raised concerns about Gibson’s ability to refinance by this summer when much of its debt could come due.
Gibson CEO Henry Juszkiewicz has said the company is meeting its obligations to bondholders and previously expressed confidence in finding a long-term solution. According to this week’s release, Gibson “has contacted and/or is in discussions with other potential investors about refinancing its bonds, when they mature, and other debt and equity investments in the company.”
However, Gibson also added that “no guarantee can be made as to the outcome of those discussions.”