Koninklijke Philips NV (EU:PHIA)
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2 Years : From Jan 2018 to Jan 2020
By Becky Yerak
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 24, 2018).
Blackstone Group LP's lending arm said bankrupt Gibson Brands Inc. has failed to properly market its assets, thereby favoring its proposed sale to senior secured bondholders.
The investment firm added that it is willing to provide additional financing to give the guitar maker more time to consider alternative offers.
Blackstone's GSO Capital Partners LP is owed $77 million on a secured term loan the musical-instruments company had on its books as it headed into bankruptcy. The firm on Friday echoed earlier calls by unsecured creditors, including electronics company Koninklijke Philips NV, for Gibson to make a bigger push to find potential new buyers.
GSO said it "would even be willing to help fund that process by providing" financing for Gibson during the bankruptcy, as well as when it wraps up chapter 11 proceedings, "to further stimulate bidding in an open-sale process," according to a filing Friday in U.S. Bankruptcy Court in Wilmington, Del.
Gibson filed for bankruptcy in May with a reorganization plan that would allow senior secured bondholders led by KKR & Co. to convert their debt into equity in the business, which was founded in 1894.
GSO said there are other interested bidders, both strategic and financial, who might be willing to buy Gibson at a price greater than the recent valuation of the Nashville, Tenn.-based owner of such guitar brands as Les Paul and Flying V. Some potential bidders haven't been contacted by Gibson about buying its assets, GSO said. Earlier efforts to find buyers have been "halfhearted" and there has been a "failure to properly market" the company, GSO said.
Gibson had no immediate comment Monday.
The reorganized Gibson is expected to be valued between $360 million and $430 million, according to an analysis by investment bank Jefferies Group.
Gibson blamed much of its recent financial struggle on its Hong Kong-based Gibson Innovations Ltd. division, which sells Philips-branded consumer electronics such as headphones and speakers. Gibson said its musical-instruments business "has performed well."
GSO said KKR is being enabled in the "scheme" to take control of Gibson by "promising existing shareholders" some of the company's value.
Gibson's majority owners, Henry Juszkiewicz and David Berryman, bought Gibson in 1986. Mr. Juszkiewicz serves as chief executive officer, while Mr. Berryman serves as president. They are also board members.
The proposed restructuring includes employment and consulting agreements with both men. Mr. Berryman would receive a salary and bonus totaling nearly $3.4 million and warrants exercisable for up to 2.2% of the equity in the reorganized company, plus health benefits. Mr. Juszkiewicz would receive, among other things, $2.1 million in consulting fees and warrants exercisable for up to 2.2% of the equity in the reorganized Gibson, plus health benefits.
"This obvious conflict of interest, and what appears to be self-dealing, calls into question" Gibson's "determination" to abandon its earlier marketing process and "capitulate" to the KKR group, GSO said.
Creditors need to know whether Gibson struck a deal with the KKR group because it believes the proposed plan is indeed in the best interest of the business "or simply because insiders with control over the company see it as the best way to gain value for themselves individually," GSO said.
Gibson's proposed restructuring should also make clear whether the money and new equity to be given to the two key insiders could otherwise be distributed to creditors, GSO said.
Earlier this month, Gibson filed a document showing how much each creditor group was expected to recover in the reorganization. GSO, however, says that disclosure statement "still contains some ambiguity" on that point.
Mr. Juszkiewicz and Mr. Berryman should be deposed to answer questions about their motives in arranging the deal with the KKR group, GSO said.
Gibson entered bankruptcy with holders of more than 69% of its $375 million in senior secured notes also agreeing to provide up to $135 million in financing to the business during its chapter 11 proceedings. That group included KKR.
GSO said it, too, offered financing to help Gibson get through bankruptcy -- and at terms that were more favorable and would have given the company more leeway to "run a proper marketing process in chapter 11."
Write to Becky Yerak at email@example.com
(END) Dow Jones Newswires
July 24, 2018 02:47 ET (06:47 GMT)
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