Guitar Center Takes Next Step to Recapitalize Company with Comprehensive Support Agreement and Financing

Guitar Center, Inc., (the “Company”) the world’s leading musical instrument retailer, announced today that it has taken the next step to implement its financial restructuring plan (the “Plan”), and has filed voluntary petitions for reorganization pursuant to Chapter 11 in the United States Bankruptcy Court of the Eastern District of Virginia.

As announced on November 13, the Company has secured new financing to implement its financial restructuring plan, which is supported by its equity 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 supermajorities of its noteholder groups. The Plan provides for a comprehensive transaction that will deleverage the Company’s balance sheet, enhance financial flexibility and provide additional liquidity to continue to support its vendors, suppliers, and employees.

Ron Japinga, CEO of Guitar Center, said: “This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth. Throughout this process, we will continue to serve our customers and deliver on our mission of putting more music in the world. Given the strong level of support from our lenders and creditors, we expect to complete the process before the end of this year.”

The Plan is backed by supermajorities of the Company’s noteholder groups who have committed to vote in favor of the Plan, existing support is above the required support thresholds in the respective agreements to approve the Plan. Guitar Center expects the process to be completed before the end of 2020.

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

Guitar Center will continue to provide uninterrupted service to its customers through its existing channels, including its stores, websites, call centers and social media pages and will continue to receive goods and ship customer orders as usual. All merchandise credits, prepaid lessons, rentals, gift cards, deposits, orders, financing and warranties will be honored. While Guitar Center is pleased with its overall store footprint, 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 prior to COVID-19.

Other Information Regarding Reorganization Proceedings

The Plan will reduce debt by nearly $800 million and is 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 to have a total of $375 million in Debtor-In-Possession (“DIP”) financing provided by certain of its existing noteholders and ABL lenders. In connection with the Plan, the Company currently intends to raise $335 million in new senior secured notes. UBS Investment Bank will serve as the lead placement agent in connection with this effort.