To briefly and simply recap, GC was bought by private equity firm Bain Capital 6 years ago and has a huge billion dollar debt as a result. Ares Management, who holds much of the Bain's debt, announced at the beginning of March that it was converting its debt to equity and assuming management of GC. Since then there have been a number of announcements regarding the complex behind the scenes financial engineering to sell a number of notes to other private equity companies to raise the necessary cash to keep everything afloat and pull some money out before the whole thing implodes.
Eric discusses this in his article, and compares what's happening to the lead-up to the mortgage crisis in that the same kind of financial engineering is taking place. The deals are all complex to keep analysts and regulators from easily figuring things out, but he managed to get to the bottom of the everything thanks to the help of some extremely literate finance experts, who all seem incredulous at the situation.
Here's the bottom line. Guitar Center is owned by a bunch of Wall Street .1%ers who don't give a crap about you, the industry or music in general. It's strictly all about money, and they'll do anything to squeeze as much out of the industry before they leave it in the dust.
I really feel sorry for the manufacturers that are caught in the middle. They have to hang in there because they've geared up for the sales volume that GC brings, but I bet they're holding their collective breath that they won't get caught holding the bag when the fire sale happens.
Read Eric Garland's post, then decide where you want to make your music purchases. And no, this is not an April Fool's joke.
Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.
You should follow me on Twitter and Facebook for daily news and updates on production and the music business.
Don't forget to check out my Music 3.0 blog for tips and tricks on navigating social media and the new music business.