Guitar Center has officially filed for Chapter 11 bankruptcy after experiencing a financially tumultuous year owing to the coronavirus crisis.
According to The New York Times, the company filed on Saturday (November 21) in the US Bankruptcy Court of the Eastern District of Virginia and will continue to pay employees amid bankruptcy.
As reported by Bloomberg earlier this month, the chain and its private equity owner Ares Management were finalising bankruptcy terms with support from most of its creditors
Under a Chapter 11 filing the company would undergo a restructuring. During this process, Guitar Center would be able to keep operating its 300 US stores and be given a break from having to make debt repayments. As per Bloomberg, the company would also cut its debt by enabling some investors to swap their holdings for a percentage of the reorganised equity.
Speculation that Guitar Center would potentially file for bankruptcy has plagued the company since October when it missed a $45million (£33.9million) interest repayment and entered a 30-day grace period.
As with many companies worldwide, the music retail giant was forced to temporarily shut many of its physical locations this year due to the pandemic. As much as 75 per cent of its stores were closed across the US.
A statement [via Businesswire] says that Guitar Center will “continue to meet its financial obligations to vendors, suppliers, and employees, and intends to make payments in full to these parties without interruption in the ordinary course of business’.
“This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth,” Guitar Center CEO Ron Japinga said in the statement.
“Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”
At present, the company has a debt of $1.3billion.