JULY 17 I GUITAR CENTER I DEBT
GC Seeks Debt Restructuring?

Reuters, the international news agency, has reported that Guitar Center is seeking solutions to restructure its $1.3 billion debt burden.

Reuters said that sources close to Guitar Center are reporting that the retailer has been in conversation with investment banks and law firms about hiring advisers to help address its capital structure. The company is majority-owned by Ares Management and has $615 million in secured debt due in 2019.

A source from Guitar Center, which is privately held, said the company does not comment on financial issues.

Guitar Center's debt is currently trading well below its face value, Reuters reported. Its $325 million in unsecured bonds due in 2020 are trading at just under 60 cents on the dollar, according to Thomson Reuters data. The company's $615 million in secured bonds due in 2019 are trading at about 87 cents on the dollar.

Credit rating agency Moody's Investors Service said in April that it did not expect that Guitar Center will generate enough free cash flow in the next 12 to 18 months to materially reduce its debt and improve leverage.

In 2014, Ares swapped its debt in the retailer for a controlling equity stake, cutting the retailer's debt by about $500 million.