Guitar Center emerges from bankruptcy, cuts $800 million of debt

By Sarah Lizee

Olympia, Wash., Dec. 22 – Guitar Center, Inc. has emerged from bankruptcy, according to a press release issued late Tuesday.

As previously reported, the U.S. Bankruptcy Court for the Eastern District of Virginia confirmed its Chapter 11 plan of reorganization on Dec. 17.

Guitar Center said it has emerged with a stronger balance sheet as a result of the elimination of nearly $800 million of debt and $165 million in new equity funding. In addition, the recapitalization transactions boost Guitar Center’s liquidity, supporting the company’s ongoing operations and enables it to invest in its strategic growth initiatives and execute its business plan.

In connection with the plan, the company raised $350 million in new senior secured notes.

In addition, several banks led by Wells Fargo and JPMorgan are expected to fund a new $375 million secured asset-based financing facility, which would provide significant additional liquidity for the business.

The new ABL facility, new senior secured notes and $165 million in new equity investments from a fund managed by Ares Management Corp., funds managed by Brigade Capital Management and a fund managed by the Carlyle Group, are expected to provide the company with the capital required to support ongoing operations, invest in its strategic growth initiatives and execute its business plan.

Under the plan, holders of other priority claims will receive payment in full in cash.

Holders of pre-petition ABL and super-priority secured notes claims will be paid in full.

Holders of secured notes claims will receive their pro rata share of the secured notes claims distribution.

Holders of other secured claims will receive payment in full in cash, have their claims reinstated, or receive the collateral securing their claims.

Holders of unsecured notes claims will receive their pro rata share of the unsecured notes claims distribution.

Holders of general unsecured claims will receive payment in full in cash.

Intercompany claims will be reinstated, compromised or canceled.

Intercompany interests will be reinstated for administrative convenience, unless otherwise determined by the debtors, but with the consent of each of the investor support parties.

Existing common equity will be canceled with no distribution.

Milbank LLP is serving as legal counsel to the company. Houlihan Lokey is serving as the company’s financial adviser. BRG is serving as the company’s restructuring adviser.

Stroock & Stroock & Lavan LLP is serving as legal counsel to an ad hoc group of secured noteholders and Province is serving as financial adviser.

Kirkland & Ellis LLP is serving as legal counsel to Ares Management Corp. Debevoise & Plimpton LLP is serving as legal counsel to Brigade Capital Management and GLC Advisors & Co. is serving as financial adviser. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel to the Carlyle Group.

The musical instrument retailer is based in Westlake Village, Calif. The company filed bankruptcy on Nov. 21 under Chapter 11 case number 20-34656.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.