Some creditors of Guitar Center Inc. have organized with the intent to vote against the retailer’s bankruptcy plan ahead of a critical deadline next week, Bloomberg News reported. Certain first-lien noteholders have signed a cooperation agreement and are raising questions about the legitimacy of a previous Guitar Center refinancing. Their concerns center on new super-senior notes previously offered by Guitar Center to pay off existing obligations and avert a default by the largest U.S. retailer of music instruments and equipment. The deal gave the new notes priority on certain collateral that was already pledged to existing first-lien notes. The dissident holders are evaluating whether the new pledge was allowed under existing debt documents, arguing that Guitar Center needed consent from each first-lien noteholder, rather than the simple majority that approved the transaction. They also object to being left out of participating in the new notes and the retailer’s bankruptcy loan. The creditor group represents about 20 percent of Guitar Center’s first-lien notes outstanding. They’re pushing back on a restructuring plan that was already supported by holders of more than 70 percent of the notes, according to Guitar Center’s disclosures.
