Dire financial situation at Gibson?

[uwe]

Henry J. has done good things for Gibson in the past - like saving their butt in the late 80ies - but he has been too long at the helm - anybody would be, it's been 30 years. It's time to - if not leave and let go - retreat to some representational, elder statesmen role for the company.

The sale of real estate worries me, once non-real estate trade companies do that, you know they are scraping the barrel. And once you hire someone like Alvarez & Marsal (who do good work, but generally have clients who are on life support systems), you're in deep shit.

Alternatively, they have to go down the drain and someone will no doubt carve out the guitar business which I believe can be continued profitably, especially once they stop alienating their retailers. I don't see a necessity for Gibson and Epiphone being bought by one new owner though it is clear that Epiphone - if no longer owned by the Gibson owner - will have to severely change its product range or pay license fees for those Gibson shapes forever. It's probably more vital for Epiphone to stick with Gibson than the other way around.

This should now better happen quickly - the company has been dragging itself through the desert for too long.

[Dave W]

I don't see Henry letting it go to Chapter 11 b/c he'd lose all of his equity. If he doesn't accept the senior debt holders' terms, and then defaults, they'll force him into it. IMHO at this point he'll have a deal forced on him if refinancing is to be done, and he'll have little choice but to accept. He'd still retain some ownership, maybe even majority ownership, but he won't have free reign.

Epiphone won't be separated from Gibson. No way.

[Dave W]

Update: Henry speaks out. I'm doubtful.

And Gibson brings back a former CFO who left after only a short time. Something tells me this may have been insisted on by the creditors.

[gearHed289]

Just a quick note - I started to Google "Gibson CEO.." and the first thing that came up was "Gibson CEO crazy". 

[Dave W]

Just a quick note - I started to Google "Gibson CEO.." and the first thing that came up was "Gibson CEO crazy". 

Google autocomplete knows everything! 

Saw this elsewhere:

[westen44]

There are articles about Gibson all over the Internet now.  I thought about posting a few, but I would hardly know where to begin.  That is quite a difference from a week ago when this topic started.  Then I had to look pretty hard to find much of anything. 

[Chris P.]

Even all Dutch news papers print about it and lots of Dutchies put it on facebook. But mostly rants without any knowledge.

[Basvarken]

Facebook. But mostly rants without any knowledge.

Tautology! 

[Dave W]

Even all Dutch news papers print about it and lots of Dutchies put it on facebook. But mostly rants without any knowledge.

I've seen lots this elsewhere. People either don't read the articles or don't understand where the debt came from. I've even seen a number of posts from people who hope Epiphone takes over Gibson. 

[Dave W]

This is being posted elsewhere, although i can't find it online at Bloomberg yet.

Gibson Creditors Are Said to Want New CEO Before Funding Rescue
2018-02-20 13:29:13.97 GMT


By Emma Orr
(Bloomberg) -- Gibson Brands Inc.'s Chief Executive Officer Henry Juszkiewicz and his creditors both see value in the iconic guitar brand -- but that might be the only thing they see eye- to-eye on.

A group of bondholders advised by PJT Partners Inc. is pushing for a restructuring that would hand them ownership of the guitar maker and let them install new leadership, according to people with knowledge of the plans. The holders don't expect Gibson's earnings will be strong enough to attract new money for a refinancing to head off a default looming later this year, and creditors are reluctant to invest more funds while Juszkiewicz is still in charge, the people said. They asked not to be identified because the plans remain private.

The bondholders, who claim to control more than two-thirds of Gibson's outstanding notes that come due in August, would allow management to keep a small ownership stake, according to the people. Juszkiewicz, who has run Nashville, Tennessee-based Gibson for more than 30 years, says he has no plans to give up majority control.

Some bondholders are "not looking to get paid back and get interest, but have other intentions that are not necessarily my intentions," Juszkiewicz, 64, said in a Feb. 15 interview with Bloomberg News. "They're trying to do everything possible to put the company in a worse position, and get us in a situation where they're exclusively talking to us. But factually, we've made our interest payments, fulfilled our obligations, and our intent is to pay back all bondholders."

Gibson is under pressure after loading up on debt for an ill-fated expansion into consumer electronics. Credit analysts have raised doubts that the company can repay borrowings coming due as soon as July. Gibson is working on a refinancing plan with investment bank Jefferies Group LLC, Juszkiewicz has said.

The company hasn't been interacting with the organized group of existing bondholders, according to the people with knowledge of the proceedings. Instead, it's trying to raise new money to refinance the entire capital structure and take out all of the existing debt, eliminating the conflict, the people said.

In addition to PJT, the bondholder group is advised by Paul Weiss Rifkind Wharton & Garrison, the people said.

Representatives for the advisers and for Jefferies didn't comment.

"A lot of times bonds just get refinanced with the same group, but in this case we're not too happy about doing that, so we're looking at different financing options," Juszkiewicz said.
"Some of them are single group, some of them are tiered financing. We've talked to lots of people, we've had interest, and some people have done initial due diligence."

The company is facing a $375 million bond maturity in August, and a springing lien that could cause $185 million of debt to become current in July if the bond maturity isn't addressed by that month.

Talks are underway, but there's not yet a deal in hand or firm pricing, Juszkiewicz said. "We're really trying to get the pricing right and get the best deal."

Juszkiewicz bought Gibson from Norlin Corp. in 1986 with two of his former Harvard Business School classmates. According to his biography on the company website, he paid his way through school playing guitar in various rock bands -- a Gibson, of course.

[Dave W]

And here's today's rebuttal from Henry.

Gibson responds to bankruptcy reports, claiming new strategy "will lead to the best financial results the company has seen in its history"

[slinkp]

It's up.  https://www.bloomberg.com/news/articles/2018-02-20/gibson-creditors-are-said-to-want-new-ceo-before-funding-rescue

[slinkp]

Looks like you called it right, Dave.  I will be really surprised if Henry gets out of this as either CEO or majority shareholder.

[Dave W]

Thanks for the link, Paul.

We'll see whose intentions win out.

[doombass]

I found this intention interesting:

"eliminating product segments that do not perform to our expectations and have little upside in the future."

I wonder what the take on this is? I would'nt be surprised if Henry considers the consumer products high on the upside while some of the musical instruments brands are on the downside in the future. I'm no expert but would'nt consumer products run at higher cost in product development than musical instruments do.