Uncorroberated Gossip ...

[uwe]

I was in a music store today and the owner told me this, I'm passing it on without any warranties as regards truth content, but it might interest some of you:

- Gibson is broke. 200 million company value, 300 million debt.

- This has been mentioned here before: Peavey was interested in buying and is financially sound, but would not pay what Henry J. and probably the banks behind him demanded.

- Supposedly things turned bad when Henry J. had a messy divorce which ended with him having to give Epiphone to his ex-wife.

- Gibson has sold the name "Gibson" to a third party in an effort to generate cash already some years ago and now has to pay crippling license fees for anything it brings out under that name.

- Epi defaulted on the payment to Chinese producers last year and still hasn't paid.

Me? I'm waiting for that Custom Shop T-40 reissue!

[OldManC]

That's a lot of craziness in one post, Uwe. Is your firm part of a hostile takeover? 

[uwe]

You mean I'm preparing to be a Henry J. successor? You know what that would do to chrome and nickel hardware, right?

You're probably right, maybe it's all bullshit. I sure hope so. I've never been a Henry J. foe - the guy looks like a nerd and probably is one - as a brand he has returned Gibson in the pantheon of great guitar makers through hard work and endurance. But from my professional practice I have already seen too many companies and financial institutions that looked great on paper and fell apart once you probed and poked behind the outer sheen.

One other thing the storeowner said was that Gibson's push for less dealers selling more had backfired. "You can do that with an elitist brand like Gibson to create desirability, but not with a budget product like Epi, if people don't find an Epi in one shop, they won't look in another one, but buy the Ibanez hanging on the wall instead", he said.

[gweimer]

WOW!  I'm stunned.  I need to talk to that ex-wife.  Don't let Epi go into the dumps again... 

Still, what we like to think is the best sounding bass around is not only expensive, but fragile to a fault.  I may need to talk to Rob about that BaCH Fenderbird.   

[Dave W]

I've heard the part about the ex-wife getting Epiphone, but Epi is still wholly owned by Gibson so AFAIK that's completely false. Never heard a thing about a divorce anyway.

It's possible that Gibson isn't in good shape. Moody's recently downgraded them. I don't believe there's been any default or things would be worse than this:

October 29, 2009 Source

Moody's Downgrades Gibson, Warns of Further Downgrade

Moody's downgraded Gibson Guitar Corp.'s corporate family rating to B3 from B2 largely due to Moody's expectation of weaker than expected 2009 operating performance versus 2008.

The ratings are on review for possible further downgrade.

The one notch downgrade in the corporate family rating to B3 from B2 reflects the company's expected diminishing operating performance in 2009 versus 2008 and Moody's view that operating performance will likely continue to be pressured for the near term. The downgrade also reflects Moody's concern over Gibson's continuing delay in issuing its 2008 audited financial statements and the risks associated with the company's corporate governance structure.

"The review for downgrade reflects Moody's concern over Gibson's liquidity position as the company no longer has access to its revolving credit facility because of the delay in issuing its financial statements by the waiver deadline" said Moody's.

The review for downgrade also reflects Moody's concern about the company's ability to comply with financial covenants over the next few quarters as the covenants contractually adjust.

Moody's review will focus on the company's liquidity position, including the cushion for covenant compliance and operating cash flow.

Headquartered in Nashville, Tenn., Gibson manufactures and markets acoustic and electric guitars under the Gibson and Epiphone brand names. Revenues for the twelve months ended June 28, 2009 were approximately $300 million.

[Grog]

 "One other thing the storeowner said was that Gibson's push for less dealers selling more had backfired."

A dealer I knew, closed his store, partialy because Gibson was letting too many stores sell their guitars. Many of the Best Buys are selling Gibson, Fenders & Epiphones.

[uwe]

They're delaying their audited financial statements? THAT concerns me more than anything I've heard from the store owner. Once the auditors flinch giving the audit, you're in reall bad shape, ouch.

Now I have nightmares of Fender buying Gibson!!!

[nofi]

YES!, now i can have that eb jazz i always wanted.

[Grog]

For a limited time only! On this special TV offer....You can have the neck plate personalized on your new Les Paul Custom!!     

[Denis]

The recent confiscation of exotic woods can't help Gibson's position economically, that's for sure, even if the charge is proven false. Gibson just doesn't need that publicity.

[Dave W]

They're delaying their audited financial statements? THAT concerns me more than anything I've heard from the store owner. Once the auditors flinch giving the audit, you're in reall bad shape, ouch.

Now I have nightmares of Fender buying Gibson!!!

Yep, the delay of the financial statements is a big red flag. Along with the loss of revolving credit. I don't believe the other rumors (except that Peavey might be interested) but Moody's evaluation is something you can't take lightly.

Fender has bought a number of troubled companies, but they may not be in a position to in this economy, especially one this big. Unless Korg ups its stake in Fender.

OTOH if there's a real problem and creditors wind up taking control, anything could happen. Can you see Gibson becoming part of a Chinese or Indian conglomerate? 

[Highlander]

FENSON... 

[Dave W]

FENSON... 

Or Gender.

[uwe]

Even if Fender, Peavey or Ibanez bought Gibson, that wouldn't be the end of the world for me, I was joking. I didn't think that the Norlin era only produced crap either and Norlin had absolutely no idea of running a guitar company. And it is my impression that Fender runs its brands responsibly.

Fender buying Gibson should have the anti-trust people perk up though ...  

OTOH, they could finally credibly and legally produce the Fenderbird!

[godofthunder]

"OTOH, they could finally credibly and legally produce the Fenderbird!" If only !...................................geeze I wonder how much that would cost