Gibson Brands Inc., the manufacturer of Gibson guitars, has filed for Chapter 11 in U.S. Bankruptcy Court in Delaware. It's the company's latest step in an ongoing attempt to reduce its debt, which reportedly could be as high as $500 million.

The news comes via Bloomberg, which offers details on the restructuring agreement: Gibson will undergo a "change of control," which will see CEO Henry Juszkiewicz, who has run the company since 1986, replaced and creditors being given equity in a new company. In exchange, the lenders will provide Gibson with a new $135 million loan so that they can continue operations. This is similar to the deal that was offered by their note-holders back in March.

They will also "unburden" themselves of Gibson Innovations, a Netherlands-based consumer electronics division that's under-performed since being purchased four years ago. The filing names the branch as the main source of the company's problems. Brian J. Fox, who will serve as the chief restructuring officer, said when Gibson Innovations lost credit insurance overseas, it became "trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales."

Previously, Juszkiewicz had blamed guitar stores for Gibson's problems, saying they were focusing on catering to professional musicians while ignoring new customers. “It's all about making the customer feel welcome," he said, "and helping them out by being knowledgeable. That's what the industry needs, because it doesn't have it. ... Kids are out there creating their own music and their own videos. We have to find a way to be a part of their lives. We're losing by not being a part of their lives, and insisting that they become a part of ours.”



The Flying V Turns 60: 25 Rock Stars With Gibson's Famous Guitar

More From 94.9 WMMQ