Guitar Center emerged from bankruptcy following the consummation of its plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code.
The plan, confirmed on Dec. 17, implements a series of previously announced recapitalizations, including exit financing and the extinguishment of all of Guitar Center’s pre-petition debt. Guitar Center eliminated nearly $800 million of debt and $165 million in new equity funding.
“We are excited to have gained the financial and operational flexibility we need to reinvest in our business and support our long-term sustainable growth, allowing us to deliver on our mission of putting more music into the world. I want to deeply thank all of our associates, customers, vendors, landlords and creditors who believed in our business and helped us get to this milestone. We look forward to strengthening our business and to building upon this momentum as we enter this next exciting chapter,” Ron Japinga, CEO of Guitar Center, said.
Key elements of the recapitalization transactions include:
- Guitar Center’s indirect parent issued a new series of senior preferred equity plus cash to holders of Guitar Center’s prepetition secured notes and a new series of junior preferred equity to holders of Guitar Center’s unsecured notes in satisfaction of such holders’ respective claims.
- Guitar Center’s indirect parent received a $165 million common equity investment from a fund managed by Ares Management Corporation, funds managed by Brigade Capital Management and a fund managed by The Carlyle Group. These investors now indirectly own all of the common equity of Guitar Center.
- Guitar Center entered into a new secured asset based revolving financing facility that provides for borrowings of up to $375 million from time to time.
- Release of the net proceeds from Guitar Center’s $350 million note issuance consummated on Dec. 15, which were used to support the consummation of the recapitalization transactions.
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Milbank served as legal counsel to Guitar Center. Houlihan Lokey served as Guitar Center’s financial advisor. BRG served as Guitar Center’s restructuring advisor.
Stroock & Stroock & Lavan served as legal counsel to an ad hoc group of secured noteholders and Province served as financial advisor.
Kirkland & Ellis served as legal counsel to Ares Management Corporation.
Debevoise & Plimpton served as legal counsel to Brigade Capital Management and GLC Advisors & Co. served as financial advisor.
Paul, Weiss, Rifkind, Wharton & Garrison served as legal counsel to The Carlyle Group.
Guitar Center is a U.S. retailer of musical instruments, lessons, repairs and rental instruments.
