Guitar Center could be the next retailer to file for bankruptcy due to the pandemic.
According to the New York Times, sources close to the situation revealed that the company missed a roughly $45 million interest payment earlier this month. That set off a 30-day grace period where if the payment is not made, the company could default on their loan. The Times reports that Guitar Center has been in talks with their creditors to make a deal where they could file for bankruptcy this year and emerge from it sometime early next year.
This isn’t the first time this year that Guitar Center has been on the verge of bankruptcy. Back in April, the company missed an interest payment and resolved it with a distressed debt exchange. That led to their credit being downgraded in May, the third time that has happened in the last year.
“We are pleased with the outcome of these transactions and the support and cooperation that we received from our lenders who recognize the value of our businesses,” said Guitar Center chief financial officer Tim Martin following the April incident. “These transactions bolster our immediate liquidity position and allow us to focus on operating our business through these difficult times. We believe that with these transactions and the staged reopening of the country along with our pre-pandemic positive business performance, we are well positioned to meet these challenging market conditions.”
The company had actually been doing better over the last few years. Through the end of February, the company had seen ten quarters of sales growth. In the last fiscal year, they generated $2.3 billion in sales. They currently have about $1.3 billion in debt.
With nearly 300 retail locations nationwide, Guitar Center has been one of the country’s leading instrument sellers since 1959. Over the years, the company has grown to include a myriad of services other than sales, including lessons, GC Repairs, GC Rentals and more. Its sister companies include orchestral and band instrument retailer Music & Arts and direct marketer Musician’s Friend.