Bankruptcy fret: guitar-maker Gibson up to its neck in debt

Guitar manufacturer Gibson may be pushed into bankruptcy as a declining interest in rock music has led to an industry suffering from dire financial problems.

Gibson, used by the likes of Les Paul, BB King and Slash, has struggled to meet deadlines for repayment of its debts in the recent past and, according to the Nashville Post, is up to its neck in debt, with a $375m collection deadline in less than six months' time. On top of that, the firm's bean counters are fretting about a further $145m worth of bank loans to mature immediately if those notes could not be refinanced or repaid by 23 July.

The Tenessee-based company's chief financial officer, Bill Lawrence, was replaced earlier in the month by returning finance boss Benson Woo after just six months in the role.

Just last week, Gibson claimed to have met all "current obligations" to its bondholders and that it was plucking up a new credit facility with investment bank Jefferies that would replace the debt set to mature in the summer.

Chairman and chief executive officer Henry Juszkiewicz said in a statement that Gibson was streamlining its focus in order to concentrate on segments that had proven to be profitable while distancing itself from those which "have little upside in the future".

"With the refinancing and the improvement in operating performance from the actions that we are rolling out, we expect the company to be organised for success and growth for years to come," Juszkiewicz said.

Started in 1902 by Orville Gibson, a restaurant clerk, the company originally built mandolins before switching to banjos in the 1920s and guitars in the 1930s to adapt to evolving music tastes.

The last three years have seen Gibson’s annual revenue fall from $2.1bn to $1.7bn amid new cries that 'rock music is dead' and the industry battles seismic shifts in consumer culture.

Retailer Guitar Center sank $1.6bn in the red las year, while Gibson's rival Fender, maker of the Stratocaster, was forced to abandon a public offering in 2012. Fender is not going down without a fight, as it last year launched a subscription-based teaching service to try and hook guitar beginners and is ever updating its range to include such innovations as Bluetooth-enabled amps.