By Tracy Rucinski
(Reuters) - GibsonBrands Inc, the maker of guitars played by the likes of B.B. King and Elvis Presley, filed for Chapter 11 bankruptcy protection on Tuesday with a plan to reorganize its musical instrument business under the new ownership of its lenders.
Nashville-based Gibson, whose legendary brands include Les Pauland SG, has been suffering under $500 million in debt linked to the acquisition of its Consumer Electronicsbusiness overseas, where sales have been in sharp decline.
In a filing in U.s. Bankruptcy Courtin Delaware, Gibsonsaid the overseas Consumer Electronicsbusiness will be wound down, allowing it to re-focus on its core guitar-making and audio businesses.
The audio business includes KRK, Cerwin Vega and Stanton headphones, loud speakers and turntables for amateur and professional musicians and sound engineers.
"This process will be virtually invisible to customers, all of whom can continue to rely on Gibsonto provide unparalleled products and customer service," Chief ExecutiveHenry Juszkiewiczsaid in a press release.
Juszkiewicz acquired Gibsonin 1986.
Under a restructuring pact, senior lenders including Silver Point Capital, Melody Capital Partners Lpand funds affiliated with Kkr CreditAdvisors will exchange debt for equity ownership in the reorganized company.
Gibsonsaid sales of its electric guitars grew 10.5 percent to $122 million in the 12 months through January from a year earlier.
Gibson, founded in 1894, makes its electric guitars in U.S. factories in Nashvilleand Memphis, Tennesseeand its acoustic guitars in Bozeman, Montana It sells more than 170,000 guitars annually in more than 80 countries.
It bought the Hong Kong-based Consumer Electronicsarm from Philipsin 2014, and started to wind down the unsuccessful business -- including formal liquidation proceedings in Hong Kong, the United Kingdomand six European countries -- on April 30, according to court papers.
Gibsonhas secured $135 million in debtor-in-possession financing to fund its operations during the Chapter 11 proceedings. It plans to exit bankruptcy on Sept. 24.
(Reporting by Tracy Rucinskiin Chicago; Editing by Susan Thomas)
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