Mesa Boogie and Guitar Center

Viesczy":2ruyuke9 said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.
 

Norton666

Member
Shiny_Surface":30pkxmfm said:
Norton666":30pkxmfm said:
I was a Mesa dealer for quite a few years and this move doesnt surprise me. Mesa have VERY strict requirements of their dealers and when I became a dealer , one of their main selling points to me was that " You'll never see Mesa in Guitar Center or online stores " . Of course that didnt hold true. When I cancelled my dealership and offered discounts on my Mesa gear to clear it out , I was threatened with legal action from Mesa. They also would not honor any warranties on equipment I sold , whether it be at full retail or not , after they found out that I was cancelling my dealership. The whole situation felt like I was dealing with a ex girlfriend throwing a fit because you dumped her.

Did Mesa force you to stock their low selling items? They have many more low selling items than the few they are known for, so I imagine much of it would just sit around in inventory compared to the relatively few popular sellers.[/quote

Mesa has a standard stock that all of their dealers are required to keep on hand at all times ( varies depending on which level dealer you are ) . My biggest issue was all of the small combos that I was forced to stock.
 

Viesczy

New member
angelspade":2arohx4v said:
Viesczy":2arohx4v said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.

Bain already paid themselves with the loans that they made GC take to then pay Bain, saddling GC with even greater debt. The "loss" Bain will realize only helps their tax position.

Banking 101.

Derek
 

glip22

Well-known member
Norton666":3sjgc1d3 said:
Shiny_Surface":3sjgc1d3 said:
Norton666":3sjgc1d3 said:
I was a Mesa dealer for quite a few years and this move doesnt surprise me. Mesa have VERY strict requirements of their dealers and when I became a dealer , one of their main selling points to me was that " You'll never see Mesa in Guitar Center or online stores " . Of course that didnt hold true. When I cancelled my dealership and offered discounts on my Mesa gear to clear it out , I was threatened with legal action from Mesa. They also would not honor any warranties on equipment I sold , whether it be at full retail or not , after they found out that I was cancelling my dealership. The whole situation felt like I was dealing with a ex girlfriend throwing a fit because you dumped her.

Did Mesa force you to stock their low selling items? They have many more low selling items than the few they are known for, so I imagine much of it would just sit around in inventory compared to the relatively few popular sellers.[/quote

Mesa has a standard stock that all of their dealers are required to keep on hand at all times ( varies depending on which level dealer you are ) . My biggest issue was all of the small combos that I was forced to stock.
Why would they just have a dollar amount minimum a dealer had to spend to place an order? I don't get the business sense of forcing you to stock undesirable products.
 

borninwinter

New member
Viesczy":wun3z0lf said:
angelspade":wun3z0lf said:
Viesczy":wun3z0lf said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.

Bain already paid themselves with the loans that they made GC take to then pay Bain, saddling GC with even greater debt. The "loss" Bain will realize only helps their tax position.

Banking 101.

Derek

Maybe I'm missing something, but I have a hard time seeing how they're making much of anything in this scenario, can you explain the banking 101?
 
Viesczy":2tsje6ad said:
angelspade":2tsje6ad said:
Viesczy":2tsje6ad said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.

Bain already paid themselves with the loans that they made GC take to then pay Bain, saddling GC with even greater debt. The "loss" Bain will realize only helps their tax position.

Banking 101.

Derek

I appreciate your response, but honestly securing a loss for tax purposes is their legal right. Are you implying that you believe that Bain will come out of their GC position at a net gain in the event that GC go BK? There are not enough liquidation assets to recoup their position in the stock buyout from what I am seeing. In terms of debt, even at a 10.00% yield it doesn't come close to paying down their equity to par. Maybe I'm misunderstanding you, but it seems that you are implying that Bain will land in a profitable position when GC goes "dark"? The math doesn't seem to work.
 

thiswaythatway

Well-known member
So how long until GC employees start bad mouthing any Mesa? I think now there will be only 1 Authorized dealer in Central/Northern NJ, Odibella's in Teanack. Oh well, the used market has always been there.
 

kalt

Member
Viesczy":3q6tqrcf said:
angelspade":3q6tqrcf said:
Viesczy":3q6tqrcf said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.

Bain already paid themselves with the loans that they made GC take to then pay Bain, saddling GC with even greater debt. The "loss" Bain will realize only helps their tax position.

Banking 101.

Derek

Not sure this is an accurate representation of the transaction and how it applies with respect to a private equity infusion of capital from a collateralized purchase of a public company. This was a leveraged buyout (LBO). Bain didn't "pay" themselves and didn't "make GC take loans". They purchased GC with debt secured by the cash flow and assets of GC. Once acquired, those loans become the obligation of the acquired entity. Ultimately, the shareholders agreed to this as the purchase price was offered at least a 25% premium over market. The real challenge here is that this was done pre-credit crunch and now with the economic slowdown and recent history of a lack of liquidity in the credit markets, the debt service (and subsequent debt restructuring) has become cost prohibitive. In other words, they cant generate enough revenue to pay their bills. Ultimately, Bain will come out positive as they used OPM to buy GC and quarantined the bad debt in the process.......

Not a fan of GC but I hate to see all those people without work.....
 
From CNN Money:

"Guitar Center has been losing money every year since acquisition, making it a nightmare equity investment for Bain Capital. Moody's rated it a lowly Caa2 (defined as "poor standing and subject to very high credit risk") in November 2010. In its report, the ratings firm stated that "the company's capital structure is unsustainable over the medium term at current levels of operating performance, and hence the probability of a default has increased. The agency affirmed the rating in February this year and as of March, the principal balance on Guitar Center's outstanding long-term debt was $1.57 billion."
 

Chris6870

Well-known member
Who is buying new Boogies anyway? You can usually pick up a slightly used one with full warranty for a fraction of buying new.
 

thiswaythatway

Well-known member
BrokenFusion":2xdy9om6 said:
Who is buying new Boogies anyway? You can usually pick up a slightly used one with full warranty for a fraction of buying new.

Well how can you buy a used amp if nobody is buying new one's?
 

jsp

Member
Yeah, plus, you can say that about pretty much any relatively mass-produced amp (except maybe the warranty part).
 

Chris6870

Well-known member
jsp":1pzg230h said:
Yeah, plus, you can say that about pretty much any relatively mass-produced amp (except maybe the warranty part).

Well the "warranty part" is a biggie, Most others mfg. don't offer a transferable warranty. Warranty is the reason one would buy new over used, if you get a full warranty on a used amp, who's going to walk into GC and pay full retail on a new one?
 

yes indeed

New member
GC is at junk status right now.... Now empolyee union issue looming... Manufacturers jumping ship. You can only kick the can down the road for so long. The question is how much longer can the can be kicked down the road? Mesa was smart to get out while the gettin' was good. If you got a gift card or anything.. I would use it up ASAP!
 
yes indeed":1fo66sso said:
GC is at junk status right now.... Now empolyee union issue looming... Manufacturers jumping ship. You can only kick the can down the road for so long. The question is how much longer can the can be kicked down the road? Mesa was smart to get out while the gettin' was good. If you got a gift card or anything.. I would use it up ASAP!


Some gear on sale soon. Will hit the used gear pricing a bit.

I would like a P90 LP....
 

Viesczy

New member
borninwinter":3td0lgsp said:
Viesczy":3td0lgsp said:
angelspade":3td0lgsp said:
Viesczy":3td0lgsp said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.

Bain already paid themselves with the loans that they made GC take to then pay Bain, saddling GC with even greater debt. The "loss" Bain will realize only helps their tax position.

Banking 101.

Derek

Maybe I'm missing something, but I have a hard time seeing how they're making much of anything in this scenario, can you explain the banking 101?

I am a former banker, sorry.

I'll spin it in smaller #s and a personal level.

My company buys your company for $50. Then as owner of your company I take out $100 in loans in the name of your company and pay myself back 2 to 1. I then let your company founder and be run ito the until I can unload it, secretly hoping to sell it at a loss as it helps my tax standing for the year I sell it.

I spend $50, get $100 back from the loan and when it is sold, if it goes for a loss my tax situation is improved and if it is sold for a gain, I make even greater than a 2 to 1 payback.

I'm set up to prosper no matter what.

Derek
 

Viesczy

New member
kalt":2yv9qm37 said:
Viesczy":2yv9qm37 said:
angelspade":2yv9qm37 said:
Viesczy":2yv9qm37 said:
Did I miss where Bain Capital was pointed out as the company that saddled GC with the suffocating debt?

Gotta love pirate capitalism.

Derek

I'm not certain what you mean by this exactly. As you may already know, Bain typically invests in entities that that have one foot in the grave to begin with. In the majority cases, the companies that they take a position in face certain failure without the capital injection, credit restructuring and debt consolidation backstop that they bring to the table. GC did not have a proverbial "gun to their head" to accept the intervention offered by Bain. Bain invests in troubled, and often over-leveraged businesses; Some of their investments work out, many do not. In the case of GC, almost all of the "equity" has evaporated and it is not their business model to own the real estate assets that they occupy, so their is no recapture in that regard. This leaves the liquidation of current inventory, and other assets...which carries some marginal value. That being said, the reality is that it is doubtful (in my opinion) that they will recoup their investment as they positioned at a "buy-out" per share price of $63.00, or a total investment of approximately $2.0 billion. The only real winner in this dismal transaction is Goldman Sachs (as usual), whom acted as lead banker / underwriter on the deal...And of course institutional shareholders whom collected an approximate 25% premium on the per share actual trading value when Bain made their "rescue" investment. Net conclusion: I do not expect that Bain will fair particularly well in the wind down, and ultimate liquidation of GC's relatively modest hard assets. I know that it was common media practice to paint Bain Capital as an evil entity throughout the recent election cycle, but the truth is far simpler: They risk big, lose big and occasionally win big...As they should, understanding the low probability arbitrage space that they traffic in.

Bain already paid themselves with the loans that they made GC take to then pay Bain, saddling GC with even greater debt. The "loss" Bain will realize only helps their tax position.

Banking 101.

Derek

Not sure this is an accurate representation of the transaction and how it applies with respect to a private equity infusion of capital from a collateralized purchase of a public company. This was a leveraged buyout (LBO). Bain didn't "pay" themselves and didn't "make GC take loans". They purchased GC with debt secured by the cash flow and assets of GC. Once acquired, those loans become the obligation of the acquired entity. Ultimately, the shareholders agreed to this as the purchase price was offered at least a 25% premium over market. The real challenge here is that this was done pre-credit crunch and now with the economic slowdown and recent history of a lack of liquidity in the credit markets, the debt service (and subsequent debt restructuring) has become cost prohibitive. In other words, they cant generate enough revenue to pay their bills. Ultimately, Bain will come out positive as they used OPM to buy GC and quarantined the bad debt in the process.......

Not a fan of GC but I hate to see all those people without work.....

In simplest terms it was, putting acronyms (LBO) and quibbling over verbiage (make GC take loans) doesn't change the raw transaction at the core. I am a former banker and well versed in how to spread excrement to make/hide questionable actions or make suck actions seem perfectly normal.

This is going to get a little off topic, but that lack of liquidity in the credit market comes from whom? Really, from whom?

Derek
 
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