*** SECOND UPDATE ***
According to a filing in U.S. Bankruptcy Court, the secured bondholders of Gibson Brands, Inc. bonds are set to receive 56 cents on the dollar for the $383 million in debt that they hold in the iconic guitar maker’s business.
Senior secured bondholders, led by KKR & Company, were informed in a court filing yesterday (July 12, 2018) that such recoveries will come from Gibson under its Chapter 11 reorganization plan. The same bondholders are currently providing financing to Gibson during the pendency of its reorganization through the U.S. Bankruptcy Court in Wilmington, Delaware. The plan, as written, will ultimately cede a majority of the equity in Gibson to the senior secured bondholders.
Gibson Brands filed a disclosure statement with the court on Thursday that also showed that the bankruptcy lenders will likely agree to take equity in the reorganized company instead of being repaid with “exit financing” or a new loan that the reorganized company will likely secure upon confirmation of its reorganization plan.
Support for the likely outcome has been endorsed by 99% of the principal amount of Gibson’s secured bondholders.
Gibson Brands, Inc., headquartered in Nashville, TN, and related companies filed for Chapter 11 reorganization bankruptcy in May of this year. Gibson, owner of such iconic brands as Les Paul and Flying V, was founded in 1894. Earlier this year, company President and CEO Henry Juszkiewicz blamed much of the company’s financial woes on the financial struggles of its Hong Kong-based Gibson Innovations, Ltd. That division, acquired by the parent company in 2014 in a $135 million deal, has been a drain on the overall company since its acquisition. Gibson Innovations sells Phillips-branded consumer electronics such as headphones and speakers.
The estimated recoveries for the two classes of general unsecured creditors will vary widely. One group of unsecured creditors, owed at least $230 million, will get nearly nothing. The Gibson Holdings, Inc. group of creditors, with claims of at least $407 million, may only receive 15 cents on the dollar.
Gibson Holdings, Inc. owns a majority share in the TEAC Corporation. The TEAC company – Japan-based – is the maker of audio electronic products for home and professional use. It also manufactures industrial electronic products for the healthcare and aerospace industries. The current estimate value of Gibson’s TEAC holdings is $61 million, and the division is not part of the Gibson Brands bankruptcy action.
Lastly, the smaller unsecured bondholders – those with claims in the range of $25,000 – stand to recover about 5 cents on the dollar.
The value of the reorganized Gibson Brands, Inc. is expected to be in the range of $360 million to $430 million upon its exit from bankruptcy. As previously reported, Gibson Brands, Inc. will likely get plan confirmation in September 2018, at which point it will emerge from bankruptcy as the “new” Gibson-branded line of companies.
Photo credit: Gibson Brands, Inc.