Bankruptcy Law News

Gibson Guitars Not Ready to Close Bankruptcy Cases, Trustee Says

Dec. 14, 2018, 8:05 PM

The United States Trustee objected to Gibson Brands Inc.'s motion to close all but one of its Chapter 11 cases, saying that more needs to be done before the musical instrument maker is ready to exit bankruptcy.

Gibson needs to challenge objectionable creditor claims, obtain final approval of fees for attorneys and other professionals, and resolve fees it owes to the U.S. Trustee, among other things, according to a Dec. 13 filing by the trustee, a Justice Department branch that oversees bankruptcy proceedings.

Gibson Brands, including its iconic line of Gibson guitars, had been a mainstay in professional and amateur music for more than a century when the company filed Chapter 11 in May.

The company blamed its financial woes on an ill-fated acquisition of an electronics company, which was renamed Gibson Innovations. Gibson sold the GI Business for $1.6 million early in the case.

Under Gibson’s reorganization plan, which the court approved Oct. 4, KKR & Co., Gibson’s principal lender, converted $518 million of debt forownership of the company.

Avoiding Fees?

Gibson filed a motion Nov. 29 asking the court to close most of the multiple cases filed by Gibson and its related companies, leaving open a single case called Guitar Liquidation Corporation to administer the post-bankruptcy debtor.

The trustee said the cases shouldn’t be closed until they are further administered. Claims objections could “consume several months,” it said.

It argued that Gibson is improperly seeking substantive consolidation of the many separately filed bankruptcy cases so it can avoid paying required trustee fees for each case.

Christopher S. Sontchi, Chief Judge of the U.S. Bankruptcy Court for the District of Delaware, will consider the motion and objection on Dec. 20.

Goodwin Procter LLP represents Gibson. The Office of the Untied States Trustee represents Andrew R. Vara, the Acting U.S. Trustee for Region 3.

The case is In re: Gibson Brands, Inc., Bankr. D. Del., 18-11025, United States Trustee’s Objection 12/13/18.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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