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Old 12-26-2012, 10:24 PM
tbp0701 tbp0701 is offline
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From what I gather, the debt is severe.

Here is some reading, if interested:
http://digitaleditions.sheridan.com/...&pre=&ver=flex

An excerpt:
Notwithstanding solid operational performance, Guitar Center has been hobbled by a crushing $1.56 billion debt burden that was incurred in late 2007 when Bain Capital acquired the business for $2.2 billion. Since the acquisition the company has consistently operated in the red, unable to cover the approximately $160 million in annual interest expense. The Steady losses have triggered regular credit "downgrades" from the ratings agencies Standard & Poor's and Moody's. In the most recent downgrade, issued on May 8th 2012 Standard and Poor's wrote " We have downgraded Guitar Center's liquidity profile to "less than adequate" and revised our ratings outlook to negative from stable.

Here's the S&P downgrade release if interested:
http://www.reuters.com/article/2012/...NA678920120508

They also say this: "Our ratings on Guitar Center reflect our assessment that the company's liquidity is 'less than adequate' but sufficient to avoid a default within two years." So, not impending doom, but they've got a lot of fixing to do.

So, yes, there is a lot of debt from the Bain buyout and going private, and I think all the acquisitions added still more (Fender and Gibson's acquisition sprees have likely left them with a lot of debt, too).

I think Bain also had GC focus more on where it makes the most money, mainly high end guitars and starter packs. Another interesting point in the first article is that GC sees much of its business and profit in its stores, not the Internet business. It probably isn't helping that both Amazon and Best Buy have pushed into the market and are generally capable of doing to GC what GC did to many smaller businesses. (Well, Best Buy has its own issues).

OK, that was far more than I had planned on typing. But my thoughts after all this is, no, GC is not going out of business, at least soon, but it has got to figure out how to handle its debt before the Bain overlords get nervous and start looking at ways to divest it.
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