Guitar Center Announces Global Agreement to Reduce Debt and Provide Significant Funding to Support Business Plan

The agreement provides that all financial obligations to vendors, suppliers and employees will continue to be paid in full in the normal course.

Business operations will continue uninterrupted

The deal includes up to $ 165 million in new equity investments to recapitalize the business and reduce debt by nearly $ 800 million

Provides $ 375 million in additional short-term liquidity

Guitar Center, Inc., (the “Company”), the world’s leading manufacturer of musical instruments, today announced that it has entered into a full Restructuring Support Agreement (the “RSA”) with its principal parties stakeholders, including its sponsor, a fund managed by the Private Equity Group of Ares Management Corporation, new equity investors Brigade Capital Management and a fund managed by The Carlyle Group, as well as qualified majorities of its groups of noteholders . The RSA provides for a global transaction that deleverages the Company’s balance sheet, will improve financial flexibility and provide additional liquidity to continue to support its vendors, suppliers and employees. RSA positions the Company to return to the growth trajectory it was on before the COVID pandemic.

Ron Japinga, CEO of Guitar Center, said: “Today we announced a very important and positive step forward to ensure the long term financial strength of Guitar Center. This agreement will allow us to significantly reduce our debt and reinvest in our business in order to better serve our customers and fulfill our mission to bring more music to the world.With ten consecutive quarters of growth before the impact of COVID-19, We are pleased with our resilient financial performance in these difficult times created by the pandemic As a result of this financial restructuring process, we will be better equipped to execute and invest in our strategic growth initiatives and we will continue to deliver through the strength of our brands, our store availability, customer-focused associate relationships, innovative music education programs and our expanding digital solutions. “

The RSA is intended to allow Guitar Center and its associated brands (including Music & Arts, Musician’s Friend, Woodwind Brasswind and AVDG) to continue to operate normally during the implementation of the transaction. As a result of the RSA, Guitar Center will continue to meet its financial obligations to vendors, suppliers and employees, and intends to make full payments to these parties without disruption in the normal course of business.

Guitar Center will continue to provide uninterrupted service to its customers through its existing channels, including stores, websites, call centers and social media pages, and will continue to receive merchandise and ship customer orders. as usual. All merchandise credits, prepaid lessons, rentals, gift cards, deposits, orders, financing and guarantees will be honored. While Guitar Center is pleased with the overall footprint of its stores, the company has engaged A&G to explore opportunities to optimize its real estate portfolio and other agreements to focus on investments that best position the company to return to its growth trajectory before COVID-19.

Other information concerning the reorganization procedure

To implement the financial restructuring plan (the “Plan”) contemplated by RSA, Guitar Center plans to file voluntary Chapter 11 reorganization petitions with the United States Bankruptcy Court. Currently, qualified majorities of the Company’s noteholder groups have signed the RSA and committed to vote in favor of the Plan, above the support thresholds required in the respective agreements to approve the Plan. Guitar Center expects the process to be completed before the end of 2020.

The proposed transaction will be supported by up to $ 165 million in new equity investments from a fund managed by the Private Equity Group of Ares Management Corporation, a fund managed by the Carlyle Group and Brigade Capital Management.

Guitar Center has negotiated for a total of $ 375 million in debtor-in-charge (“DIP”) financing provided by some of its existing ABL noteholders and lenders. Under the RSA, the Company currently intends to raise $ 335 million in new senior secured notes. UBS Investment Bank will act as the lead placement agent in this effort.

The New Senior Secured Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws and may not be offered or sold to. United States in the absence of registration or exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the securities referred to in this document, nor will there be any sale of the New Senior Secured Notes, in any event. jurisdiction in which such offer, solicitation or sale would be illegal prior to registration or qualification under the securities laws of such jurisdiction.

Milbank LLP acts as legal advisor to the Company and BRG as restructuring advisor. Houlihan Lokey is the company’s financial advisor.

Stroock & Stroock & Lavan LLP acts as legal counsel to an ad hoc group of holders of secured notes and Province acts as financial advisor.

Kirkland & Ellis LLP is legal counsel to Ares Management Corporation

Debevoise & Plimpton LLP acts as legal advisor to Brigade Capital Management and GLC Advisors & Co. acts as financial advisor.

Paul, Weiss, Rifkind, Wharton & Garrison LLP is legal counsel to The Carlyle Group.

About Guitar Center:

Guitar Center is a leading retailer of musical instruments, lessons, repair and rental in the United States With nearly 300 stores in the United States and one of the best direct selling sites in the industry, Guitar Center has been helping people make music for over 50 years. Guitar Center also provides its clients with various services focused on musicians, including Guitar Center Lessons, where musicians of all ages and skill levels can learn to play a variety of instruments in many musical genres; GC Repairs, an on-site maintenance and repair service; and GC Rentals, a program offering easy rentals of instruments and other sound equipment. Additionally, Guitar Center’s sister brands include Music & Arts, which operates more than 200 stores specializing in the sale and rental of orchestral and orchestral instruments, serving teachers, conductors, performers, university professors and students, and Musician’s Friend, a leading direct distributor of musical instruments. in the USA.

Forward-looking statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements express our current expectations, opinions, beliefs or forecasts of future events and performance. A statement identified by the use of forward-looking words such as “may”, “expects”, “projects”, “anticipates”, “plans”, “believes”, “estimate”, “will”, “should” and certain of the other foregoing statements may be deemed to be forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve risks and uncertainties which may cause actual future activities and results to differ materially from those suggested or described in this press release. By issuing forward-looking statements based on current expectations, opinions, views or beliefs, the Company has no obligation and, except as required by law, does not undertake any obligation to update or to revise these declarations or to provide any other information relating to these declarations. .

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Ira Gorski
[email protected]
(732) 740-5872

Jordan fisher
[email protected]
(573) 470-1803v

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