You may remember that Bain Capital acquired Guitar Center through a buyout in 2007. Since then, Guitar Center hasn't been doing great and recently reported a $398.7 million dollar loss in the 3rd quarter of 2013, has approximately $1.6 billion in debt, and has recently had their corporate bonds downgraded to junk status. These are typically the signs of a company on the cusp of failure, and bankruptcy quickly ensues. Ares Management to the rescue! Or perhaps...Ares Management to the rescue?
Ares Management LLC is the owner of the majority of Guitar Center's debt and the Wall Street Journal has recently reported that Ares Management is finalizing discussions with Bain Capital to take over the company. In Ares converting some Guitar Center debt to equity, a large burden will be lifted from Guitar Center. The bigger question is with trends in popular music shifting further away from guitars every year whether the world needs a big box retailer named Guitar Center. Honestly, I think the answer to that is no. Guitar Center is too big. This is a result of the over zealous expansion of Guitar Center under Bain and expect a tightening of the belt over the next few years with smaller market stores closing and a reduction of the number of stores in bigger markets.
Read the WSJ article here.