FILE - General views of the Hollywood Rock Walk at the Guitar Center on the Sunset Strip.
LOS ANGELES - Guitar Center, a leading retailer of musical instruments in the United States, has filed for Chapter 11 bankruptcy, the company announced in a news release on Saturday.
Citing hardships due to the ongoing COVID-19 pandemic, the company said it will continue to operate normally while it works through its financial restructuring process.
“Guitar Center will continue to provide uninterrupted service to its customers through its existing channels, including its stores, websites, call centers and social media pages and will continue to receive goods and ship customer orders as usual,” according to the news release.
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The retailer has secured $375 million in debtor-in-possession financing from its existing lenders and intends to raise an additional $335 million in new senior secured notes, the company stated in the news release.
“The Plan is intended to allow Guitar Center and its related brands (including Music & Arts, Musician’s Friend, Woodwind Brasswind and AVDG) to continue to operate in the normal course while the transaction is implemented,” the news release continued.
Earlier this month the company reached a restructuring agreement with key stakeholders that includes debt reduction by nearly $800 million and new equity investments of up to $165 million to recapitalize the company.
“This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth. Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year,” Ron Japinga, CEO of Guitar Center, said.
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The company’s cautiously optimistic outlook seems to emulate the rest of the U.S. as promising news about a COVID-19 vaccine has both smaller and larger business owners feeling more upbeat despite surging cases.
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Owners hope consumers and businesses will be more relaxed about spending now that two drug companies, Pfizer and Moderna, have vaccines that data shows were highly effective in testing. Some owners are rethinking their plans — some are holding off on staff cuts, while others say they’re more likely to renew their office leases even as employees still work from home.
But owners also realize many hurdles remain — the vaccines still require approval by the Food and Drug Administration, and then it will take time for millions of doses to be manufactured and widely distributed. It’s not clear how many people will decide to receive the vaccine, and in turn, how much of the population would be immune to the virus.
Meanwhile, the pandemic shows no signs of abating heading into the winter, prompting some state and local officials to increase restrictions on gatherings in public and private places. And regardless of what steps governments take, many people are limiting their activities as they fear contracting the virus.
The Associated Press contributed to this report.