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  • Strat54Strat54 Frets: 703
    Getting rid of Henry J would help turn things around methinks. They are in a sad state. Fender aren't far behind either.
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  • At this point I can't see that there's any way to avoid the lenders stepping in. They'll sell Philips Audio (USD100m), TEAC (50m) and its stakes in Onkyo Japan/USA (20m). But that will barely touch half the debt, and the remaining business is not going to be able to service a debt of 200m at 10% p.a.

    I really, really hope this will be the end of HenryJ at Gibson and the start of something new and sustainable. 
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  • guitars4youguitars4you Frets: 3625
    thanks for that - will keep an eye out for further updates

    He and his team could negotiate an exchange of their debt coming due for new notes, which may not be feasible at a reasonable price. He also could be persuaded — or forced — to give up some of his equity in exchange for the debt payments. Or he may end up taking one of the most globally recognized brands that calls Nashville home to bankruptcy court.

    Just a hunch, based on Henry's stubbornness, is he will take the bankruptcy option - If he gives up any equity in exchange of debt, then his 'backers' will certainly not want him at the helm - Do the 'backers' even want to own/run the business ? - So chances are they would look to bring in new partners/investors as soon as possible

    Interesting few months ahead
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  • BRISTOL86BRISTOL86 Frets: 1379
    Was very surprised in my recent visit to PMT in Bristol to not see a single Gibson guitar.
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  • When the inevitable happens I for one am looking forward to all the bedroom dealers doubling the price of their bang average Gibson guitars due to it being the "last chance to own"...
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  • crunchmancrunchman Frets: 3160

    The quote from the Moody's guy in the last paragraph is quite informative:

    “Some type of restructuring will be necessary,” Cassidy said. “The core business is a very stable business, and a sustainable one. But you have a balance sheet problem and an operational problem.”

    Someone will take on the guitar side of the business at the end of this.

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  • guitars4youguitars4you Frets: 3625
    BRISTOL86 said:
    Was very surprised in my recent visit to PMT in Bristol to not see a single Gibson guitar.
    it was around this time last year PMT and Gibson parted company - don't know if this is still the case but given your comments it would appear to be that way
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  • BRISTOL86BRISTOL86 Frets: 1379
    BRISTOL86 said:
    Was very surprised in my recent visit to PMT in Bristol to not see a single Gibson guitar.
    it was around this time last year PMT and Gibson parted company - don't know if this is still the case but given your comments it would appear to be that way
    Ah, that’ll explain it! :) 
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  • impmannimpmann Frets: 6804
    Whilst I agree that some of his recent moves have been questionable, let us not forget that Henry *saved* Gibson from the pit of eternal financial doom when he took over as head. They were struggling with their core products, let alone anything else - he did turn it around and if he hadn't been there, I don't believe that Gibson would have survived.

    Yes, I accept that there have been some issues of late plus some ill-judged new projects. The pricing structure (model year etc) is daft and not working. The financial mess isn't going to be solved by the current structure or strategic model. However, I do feel some of the comments toward Henry are unkind, unwarranted and unnecessary... there will be a lot of other people helping him make these decisions, and they are equally guilty. Lets not make this personal, chaps...
    Never Ever Bloody Anything Ever.

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  • NeilNeil Frets: 2120
    stickyfiddle said:
    At this point I can't see that there's any way to avoid the lenders stepping in. They'll sell Philips Audio (USD100m), TEAC (50m) and its stakes in Onkyo Japan/USA (20m). But that will barely touch half the debt, and the remaining business is not going to be able to service a debt of 200m at 10% p.a.

    I really, really hope this will be the end of HenryJ at Gibson and the start of something new and sustainable. 
    Henry J has been at the helm since he bought the company in 1986, saving them from bankruptcy. Now thirty years later it is happening again.

    I think it is the nature of the beast personally.

    So many guitars being churned out........ to a shrinking audience.


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  • ChalkyChalky Frets: 5004
    edited February 13
    At this point I can't see that there's any way to avoid the lenders stepping in. They'll sell Philips Audio (USD100m), TEAC (50m) and its stakes in Onkyo Japan/USA (20m). But that will barely touch half the debt, and the remaining business is not going to be able to service a debt of 200m at 10% p.a.

    I really, really hope this will be the end of HenryJ at Gibson and the start of something new and sustainable. 
    Be careful what you wish for. You want accountants to run a fashion company (which is what the Gibson guitar division is)?

    Better they sell out to a new owner who is interested in guitars...
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  • ChalkyChalky Frets: 5004
    edited February 13
    .
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  • JalapenoJalapeno Frets: 3213
    Neil said:


    So many guitars being churned out........ to a shrinking audience.


    Bang. On.
    Imagine something sharp and witty here ......

    Feedback
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  • Flink_PoydFlink_Poyd Frets: 2245
    I'm just a casual observer on this stuff. I'm sort of interested in it but it doesn't really affect me. One thing I have noticed about a lot of companies that seem to be struggling is they grew by acquisition of other companies. 
     Did Gibson "need" to do this or is it just standard business practice for growth?
    Nobody is guaranteed tomorrow.....


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  • Chalky said:
    At this point I can't see that there's any way to avoid the lenders stepping in. They'll sell Philips Audio (USD100m), TEAC (50m) and its stakes in Onkyo Japan/USA (20m). But that will barely touch half the debt, and the remaining business is not going to be able to service a debt of 200m at 10% p.a.

    I really, really hope this will be the end of HenryJ at Gibson and the start of something new and sustainable. 
    Be careful what you wish for. You want accountants to run a fashion company (which is what the Gibson guitar division is)?

    Better they sell out to a new owner who is interested in guitars...
    No, of course not. But that isn’t what I said. It needs someone to come in and kick Henry out. The only entity eight that power is the lenders. What happens after would be to bring in someone who understands the music side of the business AND the business side of the business.

    Maybe PRS, maybe someone else.

    The point is that Gibson can’t go on in its current form, and Henry has been trying to follow a tech-industry model of constant innovation and big acquisitions to grow the business, but that just isn’t how the guitar market works.
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  • Musicman20Musicman20 Frets: 319

    It would be interesting to know the UK sales trends of brand like Gibson post-thevotethoushaltnotspeakof....


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  • VimFuegoVimFuego Frets: 5825
    I recall a similar thing happening to Selmer, the sax maker in France. They ended up selling to a VC outfit, but they seem similar to Gibson in that they make a high end (and generally niche) product, but try to market it to a mass audience. And slap on a % for the privilege. There was a discussion I was reading about that, and someone pointed out that their (selmer, but you could also include gibson in this) traditional market which is the US and west generally is declining, their market is aging and is already saturated. The growth market is China (and the FE generally) and they don't have the same brand loyalty that we in the west may have.I reminded of the Danny Davito speech in Other Peoples Money where he described the buggy whip company, an increasing share in a declining market.

    I'm not locked in here with you, you are locked in here with me.

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  • SassafrasSassafras Frets: 12366
    I feel sorry for the people who will lose their jobs but otherwise I couldn't really care less about Gibson.
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  • Let's say they net profit 1kUS for every 5kUS guitar sold. That's 375.000 ugly looking customs they need to sell in 6 months time in order to cover some of their maturing debt? No wonder CFO jumped ship.
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  • WhitecatWhitecat Frets: 1405
    Let's say they net profit 1kUS for every 5kUS guitar sold. That's 375.000 ugly looking customs they need to sell in 6 months time in order to cover some of their maturing debt? No wonder CFO jumped ship.
    In guitar mass manufacturing you will be lucky to net 15% of your wholesale price, and closer to 10% is far more common. Makes the hole even deeper. 
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  • BRISTOL86BRISTOL86 Frets: 1379
    With gross profit margins holding at around 40% for the past five years they must have staggering operating/financing costs to be in such trouble. 
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  • crunchmancrunchman Frets: 3160
    Let's say they net profit 1kUS for every 5kUS guitar sold. That's 375.000 ugly looking customs they need to sell in 6 months time in order to cover some of their maturing debt? No wonder CFO jumped ship.


    They don't need to be able to raise the whole lot by August.  The banks would be willing to refinance it if their income was big enough and it looked like there was a realistic chance of getting it paid back.  If they could find enough money to pay off 20% of it, and show decent income levels they might be able to roll the rest of it over.

    The problem they have is that their credit rating is so low, that even if they could roll it over the interest rate they will have to pay will be so high that the sums just won't add up.

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  • BRISTOL86 said:
    With gross profit margins holding at around 40% for the past five years they must have staggering operating/financing costs to be in such trouble. 
    The article quotes 8.875% p.a. on the main 375m facility, but with the current situation they'll be lucky to refinance at anything south of 10%, and noone will lend unless there is a solid business plan that suggests they'll be able to actually make the payments on such a refinancing.

    They bet the house with the acquisitions and a plan of innovation & expansion to get the 375m in the first place. Those plans haven't borne fruit, so now they're in the shit and in a market where they get laughed at every time they try something new. 
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  • Strat54 said:
    Getting rid of Henry J would help turn things around methinks. They are in a sad state. Fender aren't far behind either.
    I was under the impression fender were doing rather well? Care to elaborate?
    "The blues ain't nothin' but a good man feelin' bad, thinkin' 'bout the woman he once was with."
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  • crunchmancrunchman Frets: 3160
    strat1990 said:
    Strat54 said:
    Getting rid of Henry J would help turn things around methinks. They are in a sad state. Fender aren't far behind either.
    I was under the impression fender were doing rather well? Care to elaborate?

    Fender have actually paid off some of their debt.  In 2016 Moodys upgraded their credit rating after they paid off $40 million.

    I can't find any more recent stuff to say that it has declined again.

    As far as I know, Fender are in a reasonably stable position, unless you know something that isn't generally known.

    I'm not sure how exposed Fender are if Guitar Center goes under.  I know they have major problems.

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  • RavenousRavenous Frets: 1442
    edited February 13
    One thing I have noticed about a lot of companies that seem to be struggling is they grew by acquisition of other companies. 
     Did Gibson "need" to do this or is it just standard business practice for growth?

    It IS standard business practice for growth, has been for the 20 years I've been watching business anyway.

    A rapid way to increase the reach of your business is to borrow money (or attract a backer) - to buy other companies - to then get access to those companies' established customers or their customer base.

    It can work if you're sensible about it.  But boy, you can look a Total Flump(TM) if you get it wrong.  I guess it doesn't work for guitar companies.

    (For example I always wondered what the hell happened to the original Steinberger after Gibson bought it. I mean they seemed to buy a product and then kill it...?)

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  • Ravenous said:

    (For example I always wondered what the hell happened to the original Steinberger after Gibson bought it. I mean they seemed to buy a product and then kill it...?)

    See also: Valley Arts, Kramer...
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  • digitalscreamdigitalscream Frets: 11306
    I think you're all missing the point. If Gibson goes tits-up, what on earth are Andertons going to do for video content?
    "Mains is ouchy if you get it up you" - Sporky
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  • RavenousRavenous Frets: 1442
    Ravenous said:
    (For example I always wondered what the hell happened to the original Steinberger after Gibson bought it. I mean they seemed to buy a product and then kill it...?)
    See also: Valley Arts, Kramer...
    Yeah - Steinie was the only one I was interested in, but I assume all of these were bought with the plan of Gibson making cheaper alternatives themselves to cash in. With hindsight that obviously wouldn't work in a saturated and conservative Guitar market...
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  • ColsCols Frets: 160
    crunchman said:

    The quote from the Moody's guy in the last paragraph is quite informative:

    “Some type of restructuring will be necessary,” Cassidy said. “The core business is a very stable business, and a sustainable one. But you have a balance sheet problem and an operational problem.”

    Someone will take on the guitar side of the business at the end of this.

    That’s actually the first time I’ve seen any kind of indication about where, in the Gibson Empire, the financial problems lie.  Looks like there’s nothing fundamentally wrong on the guitar side, just that they’ve taken on an unsustainable amount of debt in an effort to diversify the company.
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