Gibson's Statement on Bankruptcy Filing

Upon filing for Chapter 11 bankruptcy petition yesterday, Gibson Brands announced it will be refocusing the company on the manufacturing of musical instruments and professional audio products.

In a statement, Gibson noted that it has reached a "Restructuring Support Agreement" with holders of more than 69 percent of its 8.875 percent senior secured notes that were due in July. This cleared a hurdle for the "continued financing and operations of the musical instrument business as well as a change of control in favor of those noteholders."

Gibson filed 12 pre-negotiated reorganization cases under Chapter 11 of the U.S. Bankruptcy Code. The filings will allow Gibson to continue to design, build, sell and manufacture Gibson and Epiphone guitars as well as KRK and Cerwin Vega studio monitors and loudspeakers without interruption, according to the statement.

"The restructuring Support Agreement provides funding for the musical instrument and professional audio businesses, supports the company's key vendors, shippers and suppliers, and provides for the restructuring of the company's balance sheet," the statement said. "Gibson will emerge from Chapter 11 with working capital financing, materially less debt, and a leaner and stronger musical instruments-focused platform that will allow the company and all of its employees, vendors, customers and other critical stakeholders to succeed."

Henry Juszkiewicz, chairman and CEO of Gibson, and David Berryman, the company's president, will continue with the company during the "change of control" transaction, but the statement did not elaborate on what role will play.

Gibson Innovations, a consumer electronics subsidiary said to be a drain on the company, will be "wound down."

"Importantly, this process will be virtually invisible to customers, all of whom can continue to rely on Gibson to provide unparalleled products and customer service," said Juskiewicz.

With the agreement, Gibson received $135 million of debtor-in-possession financing from existing noteholders. That financing, coupled with cash generated from the business is earmarked to help Gibson maintain operations throughout the reorganization proceedings.

On May 2 at 4 p.m., Judge Christopher S. Sontchi, from the United States Bankruptcy Court for the District of Delaware, will hear first day motions geared to help the company move forward.

To read the entire Gibson statement, click here.