The company, which filed for chapter 11 in U.S. Bankruptcy Court in DE, said it will continue to operate during the proceedings as it focuses on reorganizing around its core businesses.
The company has been struggling financially for many years and with many surplus divisions of the brand being closed down, especially the ill-fated "consumer electronics" division Gibson Innovations, so that it can concentrate on its core musical instrument range.
Further, current noteholders include Silver Point Capital, Melody Capital Partners and funds affiliated with KKR Credit Advisors.
The spending spree continued in 2014, when Gibson paid $135 million to acquire Royal Phillips's home-entertainment systems, in a bid to become "the largest music and sound technology company in the world", per its CEO.
The later big-bodied Gibson jazz guitars have been in the arsenal of many great players since then, such as Wes Montgomery and Joe Pass.
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As reported by The Guardian, the Nashville-based company cited a "devastating" financial fall that left them with no option but to request court protection from creditors in order to reorganise the business.
The company issued an official statement this morning regarding its decision to enter bankruptcy protection. The U.S. made guitars were manufactured from the factories in Nashville and Memphis, Tennessee and Bozeman, Montana. That business includes the brands KRK, Cerwin Vega and Stanton, whose lines include studio monitors, headphones and turntables.
The bankruptcy petition shows the company has up to $500 million in debt.
In 2012, it bought a stake in consumer audio company Onkyo. Gibson - which also owns and makes musical instruments under a number of other household brand names including Epiphone, Kramer, Steinberger, Dobro, and Baldwin - is still a juggernaut in its industry, and the company's renewed focus on its instruments business could allow it to explore fresh ways of appealing to music fans.
The investment drained cash, and earnings plunged.