Gibson Brands has reached a deal with GSO Capital Partners, one of its existing lenders, in order to push back a loan payment by approximately two weeks to December 15th. The reason for the move was to try and time the payment such that it arrived later in the holiday season for better timing relative to their anticipated cash flow.
See more on this new, if temporary, debt deal…
According to a report by Private Equity News, Gibson had a $5 million amortization payment due by late November/early December that it wished to push back to mid-December when it expected greater cash flow. To do this, they went back to financing partner GSO, which is the lending arm of private-equity firm Blackstone Group, to work out a deal.
GSO worked out an arrangement for Gibson to facilitate its preferred delayed schedule. At the same time, GSO agreed to waive a breach of covenant by Gibson tied to a required minimum level of earnings before interest, taxes, depreciation and amortization for October, PE News said, citing unnamed sources with knowledge of the matter.
Gibson and GSO Began Working Together in February
According to the report, the two firms began working together back in February when GSO stepped in to help Gibson with a loan of $130 million, after Gibson’s previous lender called in an asset-based revolving loan, due to the guitar maker’s violation of a debt covenant which was part of that deal.
In another instance, GSO was said to have helped Gibson gather the money to make a payment on a $60 million international loan. It did this by adding $6.65 million in credit line on a $70 million domestic loan it held with the company.
Improved Third Quarter (?)
PE News says that Gibson has posted improved third quarter (ending in September) results. According to their report, Gibson’s sales of musical instruments increased 7% to $75 million…although overall revenues declined a disappointing 15% to $239 million. The reason for the overall revenue decline, they said, is “because of a sharp decline in the electronics side of the business.” NOTE: We are unable to confirm this information as Gibson is not a public company.
So how is a 15% revenue decline considered “improved third quarter results?” Because, according to PE News, the company booked a 3.5% increase in EBITDA to over $19 million. How earnings improved in the wake of a 15% revenue decline was not explained.
Looming Debt Maturity
As we’ve been reporting, Gibson is facing a substantial $520 million in maturing debt in the middle of 2018. The company has begun significant asset sales in an effort to raise cash in advance of these payments. From the looks of recent reports, they still have a long ways to go.
See more on Gibson Brands by visiting: www.gibson.com.
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