Gibson Guitars Files for Chapter 11 Bankruptcy
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After years of being in decline, veteran guitar company Gibson Brands Inc. has filed for bankruptcy protection. The company announced the news early Tuesday morning, after filing for chapter 11 in a U.S. Bankruptcy Court in Delaware. Talk of the guitar company facing imminent bankruptcy began earlier this year as reports came in that creditors were becoming antsy about the company’s ability to pay off its loans and about the company’s poor decision making behind-the-scenes.
A Bloomberg report states that the company owes as much as $500 million to its lenders, with many outlets, including The Wall Street Journal, placing the blame on Gibson’s acquisition of some home entertainment and audio equipment makers years ago. Gibson CEO Henry Juszkiewicz bought the home and audio entertainment business from Koninklijke Philips NV for $135 million in June of 2014 as part of a rebranding effort to make Gibson Brands Inc. a “music lifestyle” company. The guitar company also took on debt after purchasing a line of consumer electronics, the Japanese company Onkyo Corp.
These ill-advised purchases became the bane of Gibson’s existence and the source of their financial woes. As these acquisitions drained money from the company’s pockets on the business side, the guitar manufacture faced pressure on the production side, as new import regulations on rosewood made it harder for Gibson to acquire the resources needed to manufacture their high-end instruments.