Gibson Could be going into Bankruptcy: A Brief History of the Iconic Guitar Manufacturer

Vinyl Bay 777, Long Island’s music outlet, takes a brief look at Gibson’s financial predicament and musical history

 News broke yesterday that guitar manufacturer Gibson is potentially headed for bankruptcy. According to a report in The Nashville Post, the company has $375 million in senior secured notes that are set to mature with another $145 million that will become due if the previous notes aren’t refinanced by July 23. This means that if the deadline to refinance is not met, CEO Henry Juszkiewicz could face losing his company.

One of the largest names in guitars, Gibson was started by Orville Gibson in the late 1890s as a manufacturer of single-piece mandolin-family instruments. Their first guitars, circa the 1910s and 1920s featured a more durable violin-like shape. In the mid-1930s, the company made their first electric guitars, a Spanish-style lap guitar with a hexagonal pick-up referred to as the ES-150. Since those first designs more than a century ago, Gibson has produced several highly popular guitar models, including the Les Paul (solid-body), the SG, the ES, the Flying V, the Firebird and the Explorer, and continue to be innovators within the industry.

Gibson guitars have been a standard with rock, jazz, country and blues musicians for decades. Going back to the beginning, the ES-150 was endorsed by jazz musician Charlie Christian. Les Paul designed his groundbreaking solid-body electric guitar in the 1950s, which continue to be their most popular models. B.B. King’s “Lucille” was a custom ES-355. Other famous Gibson players include Beatles John Lennon, Paul McCartney and George Harrison, Jimi Hendrix, Green Day’s Billie Joe Armstrong, Guns ‘N’ Roses’ Slash (the company’s current ambassador), Eric Clapton, Grateful Dead’s Jerry Garcia, Foo Fighters frontman Dave Grohl, both Arlo and Woodie Guthrie, Metallica’s James Hetfield and Kirk Hammett, Bob Marley, Jimmy Page, Elvis Presley and The Rolling Stones’ Keith Richards, just to name a few.

This isn’t the first time Gibson has been in hot water financially. In 1986, current CEO Henry Juszkiewicz and company president David Berryman bought the company from the Norlin Corporation, who had been slowly driving it into financial turmoil since 1969. At the time, sales were dropping, as was the quality of the product and the company’s reputation. Juszkiewicz and Berryman were able to salvage and repair the reputation of Gibson, as well as expand the company’s hold on the music industry, which includes the acquisition of many other instrument and technology companies. Some of their current holdings include Epiphone (guitars), Baldwin (pianos), Philips (audio equipment), KRK Systems (audio equipment), TEAC Corporation (audio equipment) and Cakewalk (audio software).

Unfortunately, things haven’t been going well for Gibson’s electronics acquisitions in recent years. Sales have been slumping, which has led to stakeholders fearing for their investments. It also doesn’t help that their CFO, Bill Lawrence, left in the midst of the financial issues less than a year after taking on the position.

Gibson doesn’t seem to be too worried about the bankruptcy issue though. In a statement made by the company today (reported by Billboard), they "fully expect the bonds to be refinanced in the ordinary course of business" and are "concluding a thorough strategic and budget planning process to identify those areas where it can maximize its investments, and pare back areas where investments have not been performing to expectation." The company has already sold a couple of their underperforming warehouses and is looking to streamline underperforming acquisitions, like Philips, to “focus on brands with optimal growth potential.” Gibson has already hired a new CFO, Benson Woo, to lead the company’s recovery efforts.

Whether or not the company finds a way to restructure their finances and holdings before the July 23 deadline, Gibson’s reputation for high-quality instruments to will likely remain untouched. The iconic company has been deeply rooted in music culture for more than a century with countless artists using their guitars to make history.

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