One of the famed guitar makers of the world faces serious trouble after more than a century in business. Gibson Guitars is on a downward trail, falling near to its doom due to massive debts. Rumors say, the company is now desperate that it led them to sell-offs to compromise a long list of creditors.
The devastating news was laid bare by Nashville Post reporter Geert De Lombaerde, who exposed the humongous debt obligations and the heightening financial crisis of the legendary company. De Lombaerde revealed the company’s recent $16.6 million coupon payment to service $375 million debt, due this year.
Gibson’s financial obligations were no secret to bond holders. However, De Lombaerde knows how massive the iceberg is.
“The situation facing the iconic Nashville-based music instrument maker, which has annual revenues of more than $1 billion, is far from normal,” De Lombaerde said. “CFO Bill Lawrence recently left the company after less than a year on the job and just six months before $375 million of senior secured notes will mature.”
“On top of that, another $145 million in bank loans will come due immediately if those notes, issued in 2013, are not refinanced by July 23rd,” he added.
Gibson Guitars marked its legacy since 1902. Since then, the company has been a part of America’s music history.
Les Paul, Gibson’s first-ever signature guitar series was first released in 1952. The guitar series gained a gleaming reputation across the world, and the rest is history. Now, the company’s current situation has shaken the entire globe, especially the music business.
The company recently sold its ownership of a previous Baldwin Piano warehouse for $6.4 million. The renowned guitar maker is now planning its next move to sell an even bigger Nashville property: The Valley Arts building along Church Street. The company is trying to offload the property for $11 million. These millions of dollars will not last long in Gibson’s hands, as it will be used to pay for rising amounts of debt.
Despite the news, the industry stalwart still pulls revenues around $1 billion. However, many analysts, investors and bondholders believe the numbers are fabricated.
“This year is critical and they are running out of time — rapidly,” according to Kevin Cassidy, a senior credit officer at Moody’s Investors Service when interviewed by the Post. “And if this ends in bankruptcy, [CEO/owner Henry Juszkiewicz] will give up the entire company.”
Critics are expecting crucial changes that would take place in the future for Gibson including new leaders, or totally new control over the company.
The biggest question is, does the decline in guitar sales has to do with the company’s crisis? For years, notable changes in guitar sales continue to drop, which is linked to the surging interest in EDM and rap. However, substantial cultural changes may also be playing a larger role in the decline of sales. ‘Rock and Roll is dead’ perhaps is finally coming true, and Gibson is one of the largest names that faces the impact.
Last year, Moody also downgraded the mega-retailer, Guitar Center. The massive guitar seller has been linked to $1.6 billion worth of debt.
The Guitar Sales Decline Appear to be Much Clearer
Over the past decade, a serious drop in guitar sales continues to plunge down further. In less than a decade, guitar sales decreased from 1.5 million to roughly 1 million annually. A million difference in sales a year tells us the numbers are heading the wrong way.
Not only the number of sales drop, the prices of top line guitars decline, too. Although, it may appear beneficial for anyone on the guitar market, big names in the industry like Gibson will surely suffer the most.
We also can’t deny the fact that a guitar is just a toy for the younger ones. There had been a time when a guitar is a staple for most Americans who love rock & roll, and other similar uses. However, times have changed, as well as what people would do with their money. Options have grown, and consumers may choose a turntable, a videogame console, or a laptop than a guitar.
Perhaps, the guitar sales drop has also something to do with the slid of guitar icons. Guitar Gods seem to slowly fade, and the younger generation needs someone to look up to.
“I don’t know. Maybe the guitar is over,” said Eric Clapton last year when asked about the declining guitar sales.
“Good question though.”
This video goes into further detail about the guitar company’s ongoing troubles: