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Here’s why Gibson is bankrupt—no, it’s not because rock is dead

Here’s why Gibson is bankrupt—no, it’s not because rock is dead
[Photo: Susan Mohr/Unsplash]

The company that made the guitars played by Elvis Presley, B.B. King, Joan Jett, The Edge, and Pete Townshend has filed for bankruptcy. Gibson Brands, maker of the famed Gibson guitar, filed for Chapter 11 protection in U.S. Bankruptcy Court in Delaware this morning.

So how did we get here? Founded in 1894, the Nashville-based company sells over 170,000 guitars annually in 80 countries, per the Tennessean. Its guitars are made in U.S. factories, and it claims to have 40% of the market for electric guitars over $2,000.

So far, so good, but Gibson also sells studio monitors, headphones, turntables, and other musical instruments, and that’s where the problems started:

  • In 2012, it bought a stake in consumer audio company Onkyo.
  • In 2013, it purchased stereo maker TEAC in 2013 for $53 million.
  • The spending spree continued in 2014, when Gibson paid $135 million to acquire Royal Phillips’s home-entertainment systems, in a bid to become “the largest music and sound technology company in the world,” per its CEO. That acquisition put the company in a lot of debt.

Faced with the prospect of paying off $500 million in debt—while tech giants like Apple, Google, and Amazon enter the speaker market—Gibson was forced to file for Chapter 11. Luckily, this doesn’t mean rockers won’t be able to replace the Gibson Les Pauls they smash on stage. The company reached a deal with its debtors that will let it continue to make its iconic guitars, as well as the other musical instruments it sells under brands including Baldwin pianos, Wurlitzer, Dobro, Epiphone, KRK, and Cerwin Vega.

According to Bloomberg, Gibson’s lenders have agreed to loan them up to $135 million to keep operating while going through Chapter 11. We reached out to Gibson for further comment and will update if we hear back.

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