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Thunderbird Club

I have a note in my FB feed from a friend that writes for the Dutch magazine Die Bassist that Gibson has filed for chapter 11

Allow me to unpack some of this for all of you:

The Chapter 11 filing on Tuesday in Delaware keeps Gibson in business but gives ownership to noteholders, replacing stockholders that include Chief Executive Officer Henry Juszkiewicz, the company’s leader for more than three decades. According to court filings, current noteholders include Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors.

Chapter 11 is a reorganization, wheras chapter 7 is a liquidation. Chapter 11 allows a company to reorganize its finances (most important settle debts with equity or other consideration) while the business continues to operate.

The restructuring will allow the instrument business to "unburden" itself of a consumer-electronics unit that Gibson blamed for its financial woes. 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.

They are selling off the electronics portion of the business that has sucked up all the cash flow from the musical instrument business. There is some new financing to keep enough cash in the bank to keep the company running.

Juszkiewicz, who has found himself Invalid Link Removed 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. A representative for the company didn’t respond to questions about whether Juszkiewicz will remain as CEO or in a separate role.

Henry is gone. But he is not being fired as that would trigger severance. He was offered the choice of being put in a situation that would result in him being fired for cause (no severance and huge embarrassment) or take a 1 year deal that does away with severance and save face. His "consulting" will consist of things like "hey where did you leave the keys?"

A group of bondholders led by KKR-affiliated funds and advised by investment bank PJT Partners Inc. and Paul, Weiss, Rifkind, Wharton & Garrison LLP had been pushing for a restructuring that would hand them ownership of the guitar maker and let them install new leadership. The group had Invalid Link Removed new funds in Gibson while Juszkiewicz remained in charge, Bloomberg previously reported.

KKR hates Henry and wanted him fired. They like the guitar business and hate the other businesses that he acquired.

Editorial - It is quite possible that from the start KKR hated Henry and liked the guitar business and handed him enough debt to hang himself. The long plan being that if he fails, they take the guitar business they like if he succeeds, they make good money on the debt.

Working with Jefferies LLC, the company had sought a sale or recapitalization, approaching 58 businesses and signing 27 non-disclosure agreements. Still, Gibson said it didn’t have enough capital to pay down its debt and get more time to strike a deal, according to court filings.

They talked to everyone that might want to buy Gibson (and that likely included FMIC, the parent of 7ender). A lack of interest might indicate that for many, they are in similar circumstances and unable to raise new debt and worried about paying their own creditors.

Gibson was engaged with negotiations with the creditor group in March, talks that ended because shareholders and KKR were “Invalid Link Removed in their views regarding the appropriate consideration for the various parties involved,” according to a company statement. The company had also been talking with other potential investors in hopes of receiving new money to refinance its debt and take out the existing creditors.

At one or more meetings someone pounded the table and yelled "Fvck You!" and walked out.