Ares has converted part of its holdings in Guitar Center’s debt into preferred stock and now has a controlling interest in the business.
As a result of the deal, the company’s debt and annual cash interest expense have been reduced by around $500m and $70m, respectively.
Bain and Guitar Center’s management have retained stakes in the company.
Guitar Center CFO Tim Martin said, “These transactions significantly enhance Guitar Center’s financial position.
“On a cash flow basis, we expect to save more than $70 million a year in cash interest expense. In addition, the removal of the restrictive term loan covenant and extension of the maturity dates of our facilities provides us with financial flexibility to execute our strategic plan and to grow the business.”
In the meantime, Ares is preparing to list on the New York Stock Exchange.
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