Gibson Restructuring

[messenger]

Bonamassa has a lot of money and wealthy business associates. If anyone could pull the brand back to center he / his consortium could.

I doubt it, most musicians are morons with money.

 

[GOHOINC]

Biggest issue I see, in what I read, this isn't forcing Henry J. out... How long before he leads them down a path that strays from the "core business" again?

 

[blackba]

I hope this will allow Gibson to survive.

As much as I complain about the prices of Gibson's being too high, I would also complain if Gibson moved production 100% overseas.

 

[Wizard of Ozz]

Biggest issue I see, in what I read, this isn't forcing Henry J. out... How long before he leads them down a path that strays from the "core business" again?

Henry is done. He’s out. The share & debt-holders are in control now. Henry and the President of Gibson Bob something are staying on for a year as consultant contract employees. He was given a small payout and options to buy stock in the new rebuilt company when and if that ever happens.

Now let’s see what happens to the guitar business.

 

[GOHOINC]

Biggest issue I see, in what I read, this isn't forcing Henry J. out... How long before he leads them down a path that strays from the "core business" again?

Henry is done. He’s out. The share & debt-holders are in control now. Henry and the President of Gibson Bob something are staying on for a year as consultant contract employees. He was given a small payout and options to buy stock in the new rebuilt company when and if that ever happens.

Now let’s see what happens to the guitar business.

Where did you get this from? The most I have seen on it was consistent in the posted article as well.

"Henry Juszkiewicz, Chairman and Chief Executive Officer of Gibson Brands, and David Berryman, Gibson's President, will each continue with the Company upon emergence from Chapter 11 to facilitate a smooth transition during this change of control transaction and to support the Company in realizing future value from its core business."

States pretty clearly they will stay on even after emerging from Chapter 11 "to facilitate a smooth transition" and the language used leads me to believe that control isn't shifting until after emergence from chapt. 11 so for at least the time being, he's still in control. He might be losing control at some point in the future, but usually when the old leader that is being forced out is allowed to stay, they tend to undermine the new one... If there is another source of info please let me know, I am keenly interested in the corporate structure moving forward and its ability to influence and course correct a brand I love.

 

[Wizard of Ozz]

https://www.wsj.com/articles/guitar-mak ... 1525177170

The proposed reorganization plan wipes out the ownership stake of existing Gibson shareholders, including CEO Henry Juszkiewicz, who held a 36% stake, and President Dave Berryman, who held a 49% stake. However, Berryman will be retained for a one-year period at a salary of $3.35 million to aid in a management transition, and Juszkiewicz will receive $2.1 million to provide consulting services for a year. Juszkiewicz will also receive approximately $1.5 million in profits from the sale of shares in TEAC held by Gibson Brands. Juszkiewicz and Berryman will each also receive warrants to purchase a 2.25% interest in the reorganized company over the next five years.

He done. Adios, goodbye, sayonara, see ya.

Henry Juszkiewicz along with partner Dave Berryman rescued Gibson from the brink of collapse 32 years ago. As more and more popular music is made with computers, guitar sales began to slip, creating a challenge for Gibson. the company believed that expanding into electronics and creating a music-centered lifestyle brand was the key to overall growth. In response, Juszkiewicz oversaw an aggressive strategy that expanded Gibson into a lifestyle brand. The company acquired electronics companies that made headphones, speakers and turntables.

As Gibson took on more debt to acquire electronics companies, its annual revenue grew and its profit margins shrank. In 2010, Gibson brought in $300 million in total sales and showed an earnings-before-taxes-and-interest margin of 12.9 percent on its balance sheet. By 2015, Gibson was doing $2.1 billion in annual revenue, but its profit margin had dropped to 4 percent.

Over-leveraged, Gibson has been negotiating with banks and creditors for months. As the July 23 deadline loomed for maturities on over $500 million of funded debt obligations, the company filed for bankruptcy. As part of the bankruptcy, Gibson announced it will kill its "innovations division". Juszkiewicz said Gibson will "refocus on our core business" of musical instruments.

Gibson’s guitar business has actually been on the uptick, rising 10.5 percent since January 2017 — $110 million to $122 million during the same period. Gibson enjoys a 22 percent market share in electric guitars, and a 40 percent market share for guitars selling for more than $2,000, including the iconic Les Paul model.

Gibson paid down on its initial term loan agreement with creditors since last fall, dropping the principal balance from $60 million to $24 million, according to the filings. But those paydowns have "exacerbated liquidity issues," the company said in its bankruptcy. In addition to its debt, the company has had substantial turnover, which analysts have cited as a major problem.

A federal judge will be required to sign off on the company's plan to shed debt, which has the support of 69% of secured lenders.

Josh Friedman, senior legal analyst at Debtwire, said that a key takeaway for fans of Gibson’s instruments is that the business will continue operating, though with Juszkiewicz no longer in an ownership position. Under the terms of the deal, the company’s creditors, the largest of which is KKR Credit Advisers, will take over ownership. “For people who are worried about whether there will still be Gibson guitars, this is a good sign,” Friedman said.

 

[Wizard of Ozz]

... and who is to say that they do emerge from Chapter 11... instead of being broken down and chopped up piece by piece and sold off to the highest bidders. Creditors want money... not to run a guitar company... usually.

 

[GOHOINC]

https://www.wsj.com/articles/guitar-maker-gibson-brands-files-for-bankruptcy-1525177170

The proposed reorganization plan wipes out the ownership stake of existing Gibson shareholders, including CEO Henry Juszkiewicz, who held a 36% stake, and President Dave Berryman, who held a 49% stake. However, Berryman will be retained for a one-year period at a salary of $3.35 million to aid in a management transition, and Juszkiewicz will receive $2.1 million to provide consulting services for a year. Juszkiewicz will also receive approximately $1.5 million in profits from the sale of shares in TEAC held by Gibson Brands. Juszkiewicz and Berryman will each also receive warrants to purchase a 2.25% interest in the reorganized company over the next five years.

He done. Adios, goodbye, sayonara, see ya.

Henry Juszkiewicz along with partner Dave Berryman rescued Gibson from the brink of collapse 32 years ago. As more and more popular music is made with computers, guitar sales began to slip, creating a challenge for Gibson. the company believed that expanding into electronics and creating a music-centered lifestyle brand was the key to overall growth. In response, Juszkiewicz oversaw an aggressive strategy that expanded Gibson into a lifestyle brand. The company acquired electronics companies that made headphones, speakers and turntables.

As Gibson took on more debt to acquire electronics companies, its annual revenue grew and its profit margins shrank. In 2010, Gibson brought in $300 million in total sales and showed an earnings-before-taxes-and-interest margin of 12.9 percent on its balance sheet. By 2015, Gibson was doing $2.1 billion in annual revenue, but its profit margin had dropped to 4 percent.

Over-leveraged, Gibson has been negotiating with banks and creditors for months. As the July 23 deadline loomed for maturities on over $500 million of funded debt obligations, the company filed for bankruptcy. As part of the bankruptcy, Gibson announced it will kill its "innovations division". Juszkiewicz said Gibson will "refocus on our core business" of musical instruments.

Gibson’s guitar business has actually been on the uptick, rising 10.5 percent since January 2017 — $110 million to $122 million during the same period. Gibson enjoys a 22 percent market share in electric guitars, and a 40 percent market share for guitars selling for more than $2,000, including the iconic Les Paul model.

Gibson paid down on its initial term loan agreement with creditors since last fall, dropping the principal balance from $60 million to $24 million, according to the filings. But those paydowns have "exacerbated liquidity issues," the company said in its bankruptcy. In addition to its debt, the company has had substantial turnover, which analysts have cited as a major problem.

A federal judge will be required to sign off on the company's plan to shed debt, which has the support of 69% of secured lenders.

Josh Friedman, senior legal analyst at Debtwire, said that a key takeaway for fans of Gibson’s instruments is that the business will continue operating, though with Juszkiewicz no longer in an ownership position. Under the terms of the deal, the company’s creditors, the largest of which is KKR Credit Advisers, will take over ownership. “For people who are worried about whether there will still be Gibson guitars, this is a good sign,” Friedman said.

Thanks for this.

Isnt it great though, run the company into the ground and get $2.1 mil. to serve as a consultant on how to rebuild it...

 

[harddriver]

Wow...Getting those kind of salaries after your company goes bankrupt showing you cannot or did not know how to run your company is remarkable, I'll bet they have been cutting salaries of the workers these past many years crying poor and threatening using the threat bankruptcy/closure to do so on the backs of the average worker.

The salaries and bonuses of upper management is what is draining the profitability of companies period. Nothing is tied to actual positive performance anymore, they all have their golden parachutes, there is no sacrifice from the top.

 

[romanianreaper]

"Lifestyle Brand". I can't tell you guys how much I hate that. Gibson already was a lifestyle brand in that it stood for rock and roll. Gibson represented a low slung Les Paul on Jimmy Page, a top hat and Les Paul, etc., etc. In fact, I sometimes think that Gibson might have been able to pull back some of the ESP players with a "Hetfield 1984 Reissue Explorer", etc. but that didn't happen.

I have no problem with a company expanding and changing with the times but my god, take it slow and have focus. Don't be so aggressive that you are coming out with ridiculously priced wall art for cryin out loud.

 

[godgrinder]

Never understood why they borrowed money to buy 3rd-rate consumer electronic brands.

"I really want a TEAC sound system." Said no one ever.

Should've done it like Marshall, find some OEM manufacturers and slap your logo on it, might've went alright.

 

[napalmdeath]

Bonamassa has a lot of money and wealthy business associates. If anyone could pull the brand back to center he / his consortium could.

He's only worth 20 million. Hardly a high roller..

 

[Chris O]

Land of Confusion. Personified.

Focus on competitive pricing and QUALITY. You'll get your core back. You can't charge more for lower quality...

 

[Rdodson]

I'm no fan of Henry, and glad he will be exiting. However, he did rescue the company back when. And the reason for the consulting gigs for him and Dave are this: Gibson is a complex company and someone has to tell the new owners who does what.

I do private equity, and you can't just take over and show everyone in management the door. At the levels they are operating, the supply chain management alone, with 3 (that I know of) domestic factories and overseas suppliers/factories, must be insane. "Here are the keys, figure it out" doesn't work. Henry and Dave will be worth every penny of what they are getting in transition.

I know this doesn't make most of y'all happy. Henry made some very silly decisions. But he knows what goes where and why, and it is information that is the most valuable commodity.

 

[Rdodson]

One more point - it is interesting to note that domestic instrument sales is still on the uptick and has the higher margin. That alone is quite impressive.

 

[JTyson]

The market has changed drastically in the last 15-20 years, there are not the sheer number of buyers there used to be. Rock music, heavy rock, metal, and progressive guitar music just does not appeal to young people the way it used to. DJ's have taken on a strange replacement role as "live music" performers that was laughed at and scoffed at years ago by those of us who failed to see the writing on the wall. There are not many "guitar gods" coming through the ranks as there once was, which would naturally lead to lower sales of instruments. Not saying there is no talent out there now, there is, but look at the way they have to market themselves or their band, it has changed drastically.
I doubt seriously that it will ever be what it once was. Huge companies are going to have to get smarter about the numbers to survive. The music business itself has changed in such a way that it seems unlikely there could ever be a market for instruments that there used to be.
I have no idea what the answer is.. I have always hated the music industry, there was a side of me that was glad they got there asses kicked at some point, but there is also the side of me that realizes without the kind of backing and advertising they could provide, a bands ability to become huge will be at least somewhat limited to what they can put out there on Facebook (puke) about themselves. Some of them have figured out how to pull this off better than others
Sorry for the long winded post, I guess what I'm trying to say is that as everything changes, the sheer numbers of people who desire to be musicians will change with it, and the numbers go down.
Just my 2 cents...

 

[thrashinbatman]

"Lifestyle Brand". I can't tell you guys how much I hate that. Gibson already was a lifestyle brand in that it stood for rock and roll. Gibson represented a low slung Les Paul on Jimmy Page, a top hat and Les Paul, etc., etc. In fact, I sometimes think that Gibson might have been able to pull back some of the ESP players with a "Hetfield 1984 Reissue Explorer", etc. but that didn't happen.

I have no problem with a company expanding and changing with the times but my god, take it slow and have focus. Don't be so aggressive that you are coming out with ridiculously priced wall art for cryin out loud.

They did, kind of, with the Epiphone 84, which seems to do pretty well. There's even still a demand for that style of Explorer which hasn't been adequately filled ever since ESP was forced to stop. Even still, they should have made it a Gibson, that'd make more sense, right? It doesn't help that Gibson was approached by Hetfield to do a signature guitar and they turned him down.

They generally don't seem to understand what metal players want anymore. All of their attempts to market to metal players are 1. too tryhard and/or 2. Epiphone only. All the metal players have moved away because other brands know how to cater to that market far better, and outside of styles unique to Gibson like the Flying V, they're not needed. Considering how large of a market metal guitarists are relative to the total amount of players, that's somewhat an issue.

 

[romanianreaper]

I'm no fan of Henry, and glad he will be exiting. However, he did rescue the company back when.

Reminds me of George Lucas with Star Wars. It was like he was everyone's hero and then years later he Jar Jar Binks our ass and we are like "dude, there is the door". LOL!

They need a shakeup but agree that he saved them back then. Just not the guy now.