Venerable music gear retailer Guitar Center is preparing for a possible bankruptcy filing, according to a new report from The New York Times.
The pandemic has been tough on all areas of the music industry, and Guitar Center is no exception. The company missed an interest payment of $45 million earlier this month, setting off a 30-day grace period that ends in default.
According to the Times, Guitar Center is in talks with creditors about a plan that would see the company file for bankruptcy, with the hope of balancing its books by early 2021. Guitar Center generated $2.3 billion in sales in its most recent fiscal year but has about $1.3 billion in debt.
Guitar Center has faced financial struggles for nearly a decade, as its struggled to build an online shopping experience to rival other retailers. The pandemic compounded those problems when Guitar Center was forced to shutter nearly 300 brick-and-mortar locations across the United States.
In April, Guitar Center addressed debt payments with a series of transactions that were made possible through company lenders, allowing the company to continue operating during the summer months of the pandemic.
“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,” Guitar Center Chief Financial Officer Tim Martin said in a press release issued in May. “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 news of Guitar Center’s potential bankruptcy declaration comes in sharp contrast to another recent report regarding guitar sales. Fender and other manufacturers have reported record sales for 2020, with more musicians at home during the pandemic. People are still buying gear, but how and where they’re buying it has changed.
For musicians, the possible disappearance of Guitar Center stores — if the bankruptcy plan doesn’t work or the company closes locations — would be sorely felt. With so many locations across the country, Guitar Centers have served as de facto hubs for touring bands, the illuminated red logo shining like a beacon among crowded shopping centers and suburban malls. They’ve been the ultimate rest stop: a place to regroup, use a clean bathroom, try out new gear, and buy strings at 9 o’clock at night.