Guitar Center, the biggest musical instrument retailer in the U.S., filed for Chapter 11 bankruptcy protection because of the effects of the coronavirus pandemic.
Guitar Center tried to remain in the business during the coronavirus pandemic by offering online music lessons. But The 61-year-old company was forced to shut many of its shops in March when nationwide lockdowns were enforced - resulting in fewer customers as the economy headed sideways.
It had already seen sales plummet at malls across the U.S. and a worsening economy this year dealt a blow on the kind of discretionary spending Guitar Center relies on.
Earlier this month, Guitar Center struck a restructuring deal that includes cutting debt by almost $800 million and new equity investments of around $165 million to lift the company. The company has almost 300 stores.
Guitar Center, based on the company's bankruptcy filings, has no option but to seek protection in part because of the "the economic upheaval created by the persistence of the pandemic."
The company has debts of approximately $1.3 billion but will continue to pay its workers and operate some of its stores during the Chapter 11 process, The New York Times reported.
In 2018, most of the company's stores in the U.S. were overhauled, in a bid to be more attractive to new players, women and senior musicians. While the company's market share was robust at that point it was in debt as more sales moved online.
According to chief executive Ron Japinga, throughout the bankruptcy filing process Guitar Center will continue to serve its customers and "deliver on our mission of putting more music in the world."
Given support from creditors Janpinga said the company expected to "complete the process before end of 2020," MarketWatch quoted him as saying in a statement.
Ares Management Corp., Guitar Center's principal owner, including new equity investor Brigade Capital Management and a fund managed by The Carlyle Group will help finance the company through the process.