This music chain has 1 Idaho store, in Boise. The chain just filed for bankruptcy

Guitar Center, the largest U.S. retailer of musical instruments, has filed for bankruptcy protection late Saturday.

The company, which was struggling to compete against online rivals even before the pandemic, was hit hard when it was forced to temporarily close most of its stores earlier this year.

It entered Chapter 11 restructuring proceedings in the U.S. Bankruptcy Court of the Eastern District of Virginia. Its stores will stay open, and it will continue to pay its vendors and employees in full, the company said in a news release.

The chain’s only Idaho store is at 5761 W. Fairview Ave. in Boise, which was open as usual on Monday.

Guitar Center said it had struck an agreement with its creditors in support of a plan that would reduce its roughly $1.3 billion in debt by $800 million. To help support its bankruptcy, it said it had secured new financing from investors that include a fund managed by its current owner, the private equity firm Ares Management Corp., as well as funds managed by the hedge fund Brigade Capital Management and the Carlyle Group, also a private equity firm.

“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,” CEO Ron Japinga said in the news release. “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.”

Guitar Center’s bankruptcy is the latest example of how the coronavirus pandemic has divided U.S. retail into two groups, with a growing gap between the strongest and weakest companies. Although many people turned to hobbies like playing music while homebound, the beneficiaries of that surge in demand have primarily been businesses with strong e-commerce infrastructure.

Even before the pandemic, Guitar Center’s business was threatened by online rivals, and the company was heavily indebted as a result of a private equity-led buyout years earlier. Still, it said in a court filing, it had had 10 consecutive quarters of sales growth through the end of February. But, it said, the pandemic “wiped out much” of that progress.

Guitar Center’s origins date to 1959. The next few decades brought expansion and, in 1997, an initial public offering of stock. The company was acquired by Bain Capital, the private equity firm, in 2007 for $1.9 billion. But like many such deals, the buyout left Guitar Center heavily indebted. To reduce the debt load, some of Guitar Center’s debt was converted to equity, making Ares Management the majority shareholder in 2014.

Even so, Guitar Center continued to carry about $1.3 billion in debt as a vestige of the Bain takeover.

The Statesman called the Boise store to ask how many people worked there and how the restructuring may have affected operations. A manager referred the call to a corporate media relations email address. An employee of Edelman, a public relations firm representing Guitar Center, emailed to reiterate that business would continue uninterrupted but did not answer the questions.

Idaho Statesman Business Editor David Staats contributed.

This story was originally published November 23, 2020 at 10:41 AM with the headline "This music chain has 1 Idaho store, in Boise. The chain just filed for bankruptcy."