When the music stops: Guitar Center could file for bankruptcy

Moody’s downgraded the company’s rating this spring over debt concerns

National /
Oct.October 26, 2020 05:10 PM
(Getty)

(Getty)

The music could stop at Guitar Center in the near future.

The retailer is preparing for bankruptcy after missing a $45 million interest payment on its debt, the New York Times reported. The company has reached out to creditors to explore a plan where it could emerge from bankruptcy in 2021.

The possibility of bankruptcy comes after Moody’s and S&P downgraded Guitar Center’s rating this spring over concerns about its leverage.

A spokesperson for Guitar Center did not immediately return a request for comment.

Guitar Center occupies prime real estate in New York City, including a 30,000-square-foot location near Union Square in Manhattan. The retailer is one of the largest remaining tenants at Kushner Companies’ Times Square retail condo at 229 West 43rd Street, occupying 28,000 square feet. (The music and film publication Consequence of Sound called the Times Square property the “worst place on earth”).

Two of the largest tenants at the property have vacated since last year driving occupancy down to 52 percent. A recent appraisal of the 248,457-square-foot property slashed its value by 80 percent, to $92.5 million, from $470 million in 2017, according to Trepp.

Guitar Center has faced issues with its debt since earlier this year, when it engaged in a distressed debt exchange and skipped an interest payment. The exchange allowed the company to buy $32.5 million in new notes and use the money to meet its April interest payment.

Moody’s said the “downgrades reflect the high likelihood of further restructuring transactions to address the company’s high leverage and upcoming maturities.”

Guitar Center, which was founded in 1959, has close to 300 stores nationwide. The company had an estimated debt of $1.3 billion as of March, according to Moody’s.

Bain Capital acquired the company in 2007 for $2.1 billion, heavily financed by debt. In 2014, Ares Management gained a controlling stake in the company by converting its debt position to an equity position.

A spokesperson for Ares declined to comment.

Nationally, retailers are struggling as the coronavirus pandemic has kept people indoors and away from malls and outlets. In some rare good news, national retailers paid 86 percent of their September rent, up from 83 percent in August, according to Datex Property Solutions report.


Related Articles

arrow_forward_ios
The tax break allows foreign visitors to reclaim a sales tax of 20 percent on items bought in the country for more than £30 (Getty; Unsplash)

UK tax break expiration could hurt struggling retailers

UK tax break expiration could hurt struggling retailers
Istanye Park in Istanbul (Photo via Wikipedia Commons)

Turkish mall valued at $1B in deal with Qatar

Turkish mall valued at $1B in deal with Qatar
258 8th Avenue (Google, Target)

Target planning yet another NYC store in Chelsea

Target planning yet another NYC store in Chelsea
Churchill Real Estate's Justin Ehrlich and 381 Broadway (Google Maps)

Two-year Tribeca foreclosure saga continues with lawsuit over $20M

Two-year Tribeca foreclosure saga continues with lawsuit over $20M
Adam America's Omri Sachs and Dvir Cohen with 2503-2509 Broadway (Google Maps; Adam America)

Adam America secures $63M in financing for Upper West Side project

Adam America secures $63M in financing for Upper West Side project
Convene CEO Ryan Simonetti (Convene)

Convene closes Manhattan locations as corporate events fail to return

Convene closes Manhattan locations as corporate events fail to return
New York City District Council of Carpenters’s Monitor Glen McGorty (iStock; LinkedIn)

NYC carpenters union changes how it roots out mob ties

NYC carpenters union changes how it roots out mob ties
As workers trade in suits for sweatpants, 1 in 6 dry cleaners has closed or gone bankrupt (Getty)

Pandemic takes drastic toll on dry cleaners

Pandemic takes drastic toll on dry cleaners
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...