Wall Street Journal article yesterday:
https://www.wsj.com/articles/creditors-probe-gibsons-pre-bankruptcy-dealings-with-lenders-1530298312Creditors Probe Gibson’s Pre-Bankruptcy Dealings With Lenders
Blackstone and KKR affiliates face questions from creditors of guitar company
By
Peg Brickley
June 29, 2018 2:51 p.m. ET
Creditors are stepping up a probe of guitar-maker Gibson Brands Inc.’s pre-bankruptcy dealings, looking for signs the troubled company favored senior lenders, including affiliates of private-equity giants Blackstone Group and KKR & Co.
Blackstone’s GSO Capital Partners LP and KKR Credit Advisors (US) LLC are among the largest secured lenders to Gibson, which filed for chapter 11 bankruptcy protection May 1, with $475 million in secured debt.
In a bankruptcy court filing Thursday, the official committee representing the company’s unsecured creditors asked the Nashville-based guitar maker, GSO Capital and an informal bondholder committee with KKR as its largest member for documents detailing what happened as the company struggled to stay out of bankruptcy.
KKR declined comment on the investigation. GSO also declined to comment. Gibson could not immediately be reached for comment.
Testing the liens that anchor secured loans is a routine part of corporate bankruptcy, but such questions take on special urgency when unsecured creditors face an uncertain fate, as in the Gibson case.
Creditors are looking for grounds to challenge the secured status of the loans, which would give them leverage in talks about how to rework the company’s balance sheet and get it out of bankruptcy. They face a July 8 deadline to state their formal objections to the secured claims, but said in court papers this week that the investigation will take until early September.
Gibson’s bankruptcy filing followed lengthy negotiations and a struggle to wring profits out of its consumer electronics division, which sells Philips-branded headphones and speakers.
The company’s owners, Henry Juszkiewicz and David Berryman, negotiated with secured bondholders for months in advance of the bankruptcy filing.
Among the topics Gibson’s creditors want to probe is the decision-making behind the 2014 acquisition of the Philips consumer electronics business, court papers say. Creditors also want to know about talks concerning employment or consulting roles for Mr. Juskiewicz and Mr. Berryman.
Chapter 11 plan documents say Mr. Berryman is in line for a salary and bonus totaling $3.35 million and warrants for up to 2.25% of the reorganized Gibson. Mr. Juszciewicz gets a $2.1 million consulting fee deal, plus warrants for up to 2.25% of the post-bankruptcy company, under the proposed bankruptcy reorganization plan.
GSO and KKR are not the only lenders in the committee’s cross hairs. A loan from Elavon Financial Services DAC, U.K. Branch, is also under investigation, according to the filing with the U.S. Bankruptcy Court in Wilmington, Del.
The committee wants to know why payments were accelerated under the Elavon loan, which was paid down swiftly from $60 million to $24 million in the lead-up to the bankruptcy.
However, the private-equity powerhouses are some of Gibson’s largest lenders, court papers say.
Gibson owed GSO $74 million on a term loan at the time of the bankruptcy filing, while KKR Credit Advisors US LLC owns $198 million of Gibson’s senior secured notes, and is providing $72 million of the chapter 11 financing, court papers say.
Manufacturer of the iconic Les Paul electric guitar, Gibson also makes instruments under a number of brand names including Dobro, Epiphone, Kramer and Tobias. The company also owns historic brands, including Slingerland drums and Wurlitzer pianos.
