WESTLAKE VILLAGE (CNS) - Westlake Village-based Guitar Center, the country's largest retailer of instruments and musical equipment, joined a growing list of companies impacted by the economic toll of the COVID-19 pandemic, filing for bankruptcy, according to a report Sunday.
Guitar Center has about 300 stores across the U.S., and its sister brands include Music & Arts, which has more than 200 stores specializing in band and orchestral instruments for sale and rent, according to the Los Angeles Times.
The filing in the Eastern District of Virginia gives the company a break on its debts by letting it stay in business as it seeks to carry out a restructuring plan, the Times reported.
According to the report, a restructuring support agreement announced Nov. 13 requires new financing backed by existing creditors, in addition to $165 million in new equity investments from its parent company, Ares Management Corp., as well as the Carlyle Group and Brigade Capital Management.
Moody's Investor Service explained that the coronavirus shutdown has hit nonessential retailers hard, and that Guitar Center was particularly vulnerable because musical instruments are highly discretionary item. The company's stores were shut down in mid-March when the pandemic began in earnest. Since then, the Times reported, it has reopened some locations while maintaining online operations.
Guitar Center claims it has liabilities of between $1 billion and $10 billion, with a similar range for its assets, according to the filing.
According to the report, Ares acquired the company in 2014 in an out-of-court restructuring of Guitar Center's substantial debt load, the result of a deal by Bain Capital LP in 2007 to take it private.