Guitar Center Files for Chapter 11

Paul, Weiss is advising The Carlyle Group in the bankruptcy of Guitar Center Inc., the world’s leading musical instrument retailer. The Guitar Center filed for Chapter 11 in U.S. Bankruptcy Court of the Eastern District of Virginia and obtained court approval for a timeline that will allow it to exit bankruptcy pursuant to a prepackaged reorganization plan by the end of the year.

Under the terms of the plan, funds managed by The Carlyle Group, along with Brigade Capital Management and Ares Management Corporation, will provide up to $165 million in new equity investments to ensure that the company’s normal operations continue. The plan will reduce the company’s debt by nearly $800 million, deleverage the company’s balance sheet, and provide additional liquidity to support its vendors, suppliers and employees. Guitar Center has also negotiated a $375 million debtor-in-possession package with lenders and current noteholders, and intends to raise another $335 million in new senior secured notes.

The Paul, Weiss team includes, among others, restructuring partners Paul Basta and Jacob Adlerstein; corporate partner Angelo Bonvino and counsel David Harris; tax partner David Mayo; intellectual property partner Charles Googe; litigation partner Geoffrey Chepiga and Aidan Synnott and counsel Steven Herzog; executive compensation counsel Reuven Falik; and antitrust counsel Yuni Sobel and Marta Kelly.