New York (CNN Business) - Guitar Center is filing for Chapter 11 bankruptcy, the latest company to go bankrupt during the pandemic that has decimated America's retail sector.
The 61-year-old company -- the biggest musical instrument retailer in the United States -- had tried to stay afloat during the coronavirus pandemic by offering virtual music lessons. But Guitar Center was forced to close many of its stores in March during nationwide lockdowns, and it struggled to get customers to buy instruments as the economy headed south.
Guitar Center has 269 locations, many of which are in malls that had been struggling long before Covid-19. Foot traffic in malls has plummeted, and stores like Guitar Center that are dependent on people making discretionary purchases have been among the worst-hit this year.
The company said in its bankruptcy filing that it received up to $165 million in new equity investments and lenders agreed to reduce the company's debt by nearly $800 million.
The company's primary owner, Ares Management Corporation, as well as new equity investor Brigade Capital Management and a fund managed by The Carlyle Group will help finance Guitar Center through bankruptcy.
"This is an important and positive step in our process to significantly reduce our debt and enhance our ability to reinvest in our business to support long-term growth," Guitar Center CEO Ron Japinga said in a statement.
The company will continue to stay in business during the bankruptcy process. But it may not be able to capitalize on the holiday shopping boom. More than a quarter of Americans — 28% — say they will spend less on holiday gifts this year compared to last year, Gallup said in a new poll, marking the highest percentage Gallup has recorded in this category since 2012.
"We will continue to serve our customers and deliver on our mission of putting more music in the world," Japinga said. He added that the company expects to complete the process by the end of the year.