Originally Posted by DrumEatDrum
(oddly enough, Guitar Center being the main culprit).
I read an article on this a few months back.
GC was recently acquired in a leveraged buyout, a transaction where the buyer
borrows most of the funds for the purchase and then transfers the debt
to the company they just bought - I kinda despise LB's because of this.
As a result GC is in desperate straights, near bankruptcy,
most of their massive income is required to service the debt.
They are trying to grow their way out of it however by building more stores,
which unfortunately is a capital expense, increasing debt still more.
If they go chapter 11, and the press piece suggested it should be
happening around nowish, the repercussions to manufacturers
will be large, since many of them are sitting on huge accounts receivable
from GC that they would have to write off.
Edit: probably should have mentioned the article was posted here too. :-)