Guitar Center, the biggest musical instrument retailer in the United States, is filing for Chapter 11 bankruptcy amidst ongoing impacts to retail due to the coronavirus pandemic.
Guitar Center and its sister brand Music & Arts attempted to adapt to the ongoing pandemic by offering live online music sessions, but it seems the change in strategy may not have been enough.
The filing in the Bankruptcy Court of the Eastern District of Virginia will allow Guitar Center and its related brands to continue to operate in the normal course while it carries out a restructuring plan.
“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,” Ron Japinga, CEO of Guitar Center, said.
“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.”
The retailer is just one in a host of businesses that have been heavily hit by the coronavirus pandemic, which has caused a host of store closures across the country since March.
Non-essential retail has been intermittently closed across the US under stay-at-home orders, preventing customers from shopping in stores in person.
Unemployment rates have also soared in the country throughout the year, leaving people with less disposable income for discretionary purchases.
Guitar Center has around 300 stores across the US and its sister brand Music & Arts has more than 200 stores specialising in band and orchestral instruments for sale and rent.
The plan will reduce debt of the brand by nearly $800 million and is supported by up to $165 million in new equity investments, Guitar Center said.
The company said it has liabilities of $1 billion to $10 billion, with a similar range for its assets, according to the filing.