Fender to close New Hartford operations

killdeer43 · Apr 27, 2014

Westerly Wood said:
Really? I don't understand why we can't have these types of discussions? Seems like a reasonable question, and why is it that the intent is immediately considered inflammatory?

It's also OK to kid around, and if you know me and/or the majority here, you should know that my comment was in jest.

layful:

Discuss away....anything you want. :tranquillity:

Jester Joe

Westerly Wood · Apr 27, 2014

killdeer43 said:
It's also OK to kid around, and if you know me and/or the majority here, you should know that my comment was in jest. layful:

Discuss away....anything you want. :tranquillity:

Jester Joe

Agree, I should have known this Joe. Sorry.

Westerly Wood · Apr 27, 2014

SFIV1967 said:
I saw and compared them all at NAMM and also played both GADs and Arcos in shops, last time last week. The Arcos were not my type of guitar, I would mostly prefer the GADs. Arcos are like plywood guitars (sorry to say) even by the hand-rubbed satin polyurethane finish to me, even if GADs are sometimes too shiny for my taste...But the pure look of the Arcos is too simple for me. So both are not for me anyway. Comparing a MIM Arcos to a US Guild is just not right...No way you can compare them. To me Arcos is lower than the GADs. I cannot imagine that Guild sells many Arcos.
Ralf

Thanks Ralf, neither sound like my cup of tea either. I just wish I knew what direction Fender was now taking Guild. I just hold on to many of your gut instincts for a Corona return. Couldn't they just give it one more go with some select models? D40, D55, F212, 412, Arched back D25? Like just those 5. Just one more go. What could it hurt for crying out loud? I commit to buying one and rising up from my Westerly bias.

griehund · Apr 27, 2014

A few casual comments from a good source over the weekend:

There is hope that Guild will restart USA production. Not so for Fender, there are enough strats and teles out there to last a life time. New owner leaning towards using Fender name for "life-style" marketing (expanded production of non musical merchandise). As HardRock Cafe.

Casual comments are not to be confused with factual information. This is pure scuttlebut and should be accepted as such.

twocorgis · Apr 27, 2014

griehund said:
A few casual comments from a good source over the weekend:

There is hope that Guild will restart USA production. Not so for Fender, there are enough strats and teles out there to last a life time. New owner leaning towards using Fender name for "life-style" marketing (expanded production of non musical merchandise). As HardRock Cafe.

Casual comments are not to be confused with factual information. This is pure scuttlebut and should be accepted as such.

Really Cliff? Totally canning Fender production seems kinda asinine to me. There will always be some demand for Strats and Teles, just not in the zillion incarnations they have now. Much like GM quit making seven different versions of the same car, Fender needs to do the same with their instruments, and I think that means streamlining Guilds model range too. This of course is assuming Guild survives the sh*tstorm that is obviously just beginning at this point. See my earlier post in this thread for the stupid overlap in the low/mid price line. That needs to go. In fact, IMO they could can the whole Arcos line. I don't see why it even exists.

At this point, I think all bets are off for the future of Fender, and as alpep said, if GC goes under it's entirely possible that it will take FMIC with them. Only time will tell.

SFIV1967 · Apr 27, 2014

Westerly Wood said:
Couldn't they just give it one more go with some select models? D40, D55, F212, 412, Arched back D25? Like just those 5. Just one more go.

I don't think this would fly with only those 5. Obviously only the Guild marketing people know the exact sales figures per model in the last 5 years.

twocorgis said:
IMO they could can the whole Arcos line. I don't see why it even exists.

+1 !
Ralf

Default · Apr 27, 2014

Another thought. If GC goes under and all that stock is dumped onto the market, what would be the repercussions for everybody in the industry? Say that everything goes out the door for 25% of the tagged price?
Every facet of the industry gets pummeled, from manufacturing to retail.

twocorgis · Apr 27, 2014

Default said:
Another thought. If GC goes under and all that stock is dumped onto the market, what would be the repercussions for everybody in the industry? Say that everything goes out the door for 25% of the tagged price?
Every facet of the industry gets pummeled, from manufacturing to retail.

I'm sure it would have some major repercussions, but it would likely just be in the near term. Also, when retailers go out of business lately, rarely is there stock that's sold for 25 cents on the dollar. Most liquidations are conducted by these now huge liquidations companies, and initially there's not much more discount than you might normally get. It's only towards the end that you see something like 70% off, and then it's on stuff that nobody wants.

H.P. · Apr 27, 2014

No major maker has the long-term reputation of Guild in the building of wonderful-sounding 12-string guitars. I would like to see any new incarnation of Guild build on the acclaim rightly given to their 12-strings. If only we had some new hero of the stature of John Denver/Roger McGuinn/Gordon Lightfoot to step forward playing an F-512. . .

JohnW63 · Apr 27, 2014

If only Bill Gates was a Guild ( and Ovation ! ) fan. He donates more to charity than it takes to run that factory, I'd bet.

Watasha · Apr 27, 2014

FMIC isn't going anywhere guys. GC may indeed go under but the Strats & Teles will always be around. There's way too much value there for there not to be a Fender.

JohnW63 · Apr 27, 2014

After some chapter 7 or 11 or what ever restructuring is, maybe.

twocorgis · Apr 27, 2014

Watasha said:
FMIC isn't going anywhere guys. GC may indeed go under but the Strats & Teles will always be around. There's way too much value there for there not to be a Fender.

BIG difference between Fender and FMIC, though. I have a feeling that FMIC is on the verge of getting dismantled in a huge way. That's what these private equity firms like TPG and Servco Pacific do, unfortunately. The Fender name itself is probably the most valuable asset in FMIC, and as such will definitely survive. Hopefully, somebody that actually knows something about musical instruments, unlike TPG and Servco, will end up with control. Once a company is in the hand of corporate vultures like these guys, all you can do is hope for the best.

mjudd · Apr 27, 2014

Default said:
Another thought. If GC goes under and all that stock is dumped onto the market, what would be the repercussions for everybody in the industry? Say that everything goes out the door for 25% of the tagged price?
Every facet of the industry gets pummeled, from manufacturing to retail.

If GC goes under, in the short term, everyone in the music industry would suffer. In the long run, I think this would be (obviously) good for mom-and-pop guitar shops and probably for brands like Guild, Larrivee, Breedlove and other (acoustic) brands that you don't see very often in GC.

SFIV1967 · Apr 27, 2014

mjudd said:
If GC goes under...

Doesn't look like...
April 3, 2014: "Ares Management LLC took a controlling stake in music-instruments retailer Guitar Center, part of a deal that converted some of the private-equity firm's debt in the retailer into equity, the retailer said. Bain Capital, Guitar Center's former owner, retained partial ownership of the company, along with representation on the board. Guitar Center, a 250-store U.S. chain, had about $1.6 billion in debt, much of it stemming from Bain's $2.1 billion leveraged buyout of the company in 2007. The company was due to pay about $144 million in annual debt payments through 2016 and about $150 million total in 2017 and 2018, according to recent quarterly securities filing."

April 3, 2014: Guitar Center Announces Improved Capital Structure, Now Poised to Accelerate Growth. "Guitar Center, the world's largest retailer of musical instruments and recording equipment, today announced the successful completion of financial transactions that greatly improve the company's financial position. As a result of these transactions, Guitar Center's total debt has been reduced by approximately $500 million and annual cash interest expense has been reduced by over $70 million. The improved financial position of the company will enable Guitar Center's management team to further invest in its people, store base and brands to accelerate growth.
As part of the transactions, affiliates of the Private Equity Group of Ares Management exchanged a portion of their holdings of Guitar Center's debt into preferred stock and assumed a controlling interest in the company. Affiliates of Bain Capital retained partial ownership of the company, along with representation on the Board of Directors.
Concurrently with the partial debt-to-equity exchange, Guitar Center completed a refinancing of its remaining indebtedness with proceeds from new senior secured notes, senior unsecured notes, and a new revolving credit facility. Aside from carrying a lower interest burden, the company's new debt structure provides for substantially more flexibility and improved credit terms over the next five years.
"This new capital structure is the culmination of a lot of hard work over the last year. Further, it marks a significant moment for Guitar Center as we strengthen our company and welcome Ares Management and its retail expertise alongside that of Bain Capital. We now have the necessary resources to expand our footprint and to invest in our people, stores and product assortment. Guitar Center is well positioned to expand our multi-channel offering nationally and to significantly accelerate growth through new services and a strong focus on improving our customer experience. We believe that 2014 is going to be a landmark year of exciting change for Guitar Center and our valued vendor partners." - Mike Pratt - CEO, Guitar Center
"These transactions significantly enhance Guitar Center's financial position. On a cash flow basis, we expect to save more than $70 million a year in cash interest expense. In addition, the removal of the restrictive term loan covenant and extension of the maturity dates of our facilities provides us with financial flexibility to execute our strategic plan and to grow the business." – Tim Martin, Chief Financial Officer, Guitar Center"

Ralf

griehund · Apr 27, 2014

SFIV1967 said:
Doesn't look like...
April 3, 2014: "Ares Management LLC took a controlling stake in music-instruments retailer Guitar Center, part of a deal that converted some of the private-equity firm's debt in the retailer into equity, the retailer said. Bain Capital, Guitar Center's former owner, retained partial ownership of the company, along with representation on the board. Guitar Center, a 250-store U.S. chain, had about $1.6 billion in debt, much of it stemming from Bain's $2.1 billion leveraged buyout of the company in 2007. The company was due to pay about $144 million in annual debt payments through 2016 and about $150 million total in 2017 and 2018, according to recent quarterly securities filing."

April 3, 2014: Guitar Center Announces Improved Capital Structure, Now Poised to Accelerate Growth. "Guitar Center, the world's largest retailer of musical instruments and recording equipment, today announced the successful completion of financial transactions that greatly improve the company's financial position. As a result of these transactions, Guitar Center's total debt has been reduced by approximately $500 million and annual cash interest expense has been reduced by over $70 million. The improved financial position of the company will enable Guitar Center's management team to further invest in its people, store base and brands to accelerate growth.
As part of the transactions, affiliates of the Private Equity Group of Ares Management exchanged a portion of their holdings of Guitar Center's debt into preferred stock and assumed a controlling interest in the company. Affiliates of Bain Capital retained partial ownership of the company, along with representation on the Board of Directors.
Concurrently with the partial debt-to-equity exchange, Guitar Center completed a refinancing of its remaining indebtedness with proceeds from new senior secured notes, senior unsecured notes, and a new revolving credit facility. Aside from carrying a lower interest burden, the company's new debt structure provides for substantially more flexibility and improved credit terms over the next five years.
"This new capital structure is the culmination of a lot of hard work over the last year. Further, it marks a significant moment for Guitar Center as we strengthen our company and welcome Ares Management and its retail expertise alongside that of Bain Capital. We now have the necessary resources to expand our footprint and to invest in our people, stores and product assortment. Guitar Center is well positioned to expand our multi-channel offering nationally and to significantly accelerate growth through new services and a strong focus on improving our customer experience. We believe that 2014 is going to be a landmark year of exciting change for Guitar Center and our valued vendor partners." - Mike Pratt - CEO, Guitar Center
"These transactions significantly enhance Guitar Center's financial position. On a cash flow basis, we expect to save more than $70 million a year in cash interest expense. In addition, the removal of the restrictive term loan covenant and extension of the maturity dates of our facilities provides us with financial flexibility to execute our strategic plan and to grow the business." – Tim Martin, Chief Financial Officer, Guitar Center"

Ralf

So the GC can has been kicked down the road. There may indeed be hope for Guild acoustics if production can be increased to GC requirements. NS, GAD, ARCOS, ORPHEUM, and all other US production taken in total may be able to fit the bill. We shall see what we shall see.

JohnW63 · Apr 27, 2014

Yeah. They just refinanced the debt and got better interest rates on them so they don't have as high a payment. It may give them more time before it all comes due. Seems Bain Capitol may be more of a back seat partner now. No idea of that is good or not. Unless they have learned how to make MONEY , I think the can has just been kicked down the road a bit.

twocorgis · Apr 27, 2014

JohnW63 said:
Yeah. They just refinanced the debt and got better interest rates on them so they don't have as high a payment. It may give them more time before it all comes due. Seems Bain Capitol may be more of a back seat partner now. No idea of that is good or not. Unless they have learned how to make MONEY , I think the can has just been kicked down the road a bit.

I'm pretty much expecting GC to start closing some "under-performing" stores soon, and hope mine (store 814), isn't one of them. There's a really good bunch of people that run my local GC, and I'd hate to see them lose their jobs. It's bad enough that they work for such a sucky company.

davismanLV · Apr 27, 2014

I have to agree, Sandy. As much bad stuff and bitching that I hear about GC, my local one is a really nice store with good people. They pretty much leave you alone and if you need something, you just let them know. Trust me, I don't go there for KNOWLEDGE, but make sure I know what I'm looking for before I ever wander in. Got a smokin' hot deal on my Taylor in 2012. And their deals on used stuff can be killer, and they have that return policy that makes shopping worry free. I'd really hate to see anything happen to Guitar Center. They must make a TON of money off all the ukuleles they sell!! Maybe that's a local, Vegas thing?

Watasha · Apr 27, 2014

twocorgis said:
BIG difference between Fender and FMIC, though. I have a feeling that FMIC is on the verge of getting dismantled in a huge way. That's what these private equity firms like TPG and Servco Pacific do, unfortunately. The Fender name itself is probably the most valuable asset in FMIC, and as such will definitely survive. Hopefully, somebody that actually knows something about musical instruments, unlike TPG and Servco, will end up with control. Once a company is in the hand of corporate vultures like these guys, all you can do is hope for the best.

True. It seems like everything ends up being absorbed into huge conglomerates these days. Enough is never enough.

Fender to close New Hartford operations

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