FINANCE

Guitar Center reduces debt, interest expense

BY Dan Berthiaume

Los Angeles — Guitar Center’s total debt has been reduced by approximately $500 million and annual cash interest expense has been reduced by more than $70 million. The improved financial position of the company will enable Guitar Center’s management team to further invest in its people, store base and brands to accelerate growth.

As part of the transactions, affiliates of the Private Equity Group of Ares Management exchanged a portion of their holdings of Guitar Center’s debt into preferred stock and assumed a controlling interest in the company. Affiliates of Bain Capital retained partial ownership of the company, along with representation on the board of directors.

Concurrently with the partial debt-to-equity exchange, Guitar Center completed a refinancing of its remaining indebtedness with proceeds from new senior secured notes, senior unsecured notes, and a new revolving credit facility. Aside from carrying a lower interest burden, the company’s new debt structure provides for substantially more flexibility and improved credit terms over the next five years.

"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,” said Tim Martin, CFO, Guitar Center. “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."

Proskauer Rose LLP acted as legal advisor to Ares. Kirkland & Ellis LLP acted as legal advisor to Bain Capital and to Guitar Center. BofA Merrill Lynch, Deutsche Bank Securities, J.P. Morgan and RBC Capital Markets acted as joint bookrunners on the new Secured and Unsecured Notes. Wells Fargo Capital Finance and Bank of America Merrill Lynch acted as joint lead arrangers on the new revolving credit facility.

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OPERATIONS

360pi names new VP customer value

BY Dan Berthiaume

Ottawa, Canada — Greg Soussloff has joined 360pi as VP of customer value. Soussloff brings 20 years of sales and sales management experience to this role.

Prior to joining 360pi, Greg was the U.S. senior director for retail and consumer goods for SAS’ Americas division, where he helped in securing enterprise agreements with retailers and consumer goods companies including Macy’s, eBay, Nike, Kellogg, Wal-Mart and Nestle. Soussloff will be located in Dallas, as part of 360pi’s U.S. presence.

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OPERATIONS

NRF urges 40-hour week for full-time workers

BY Dan Berthiaume

Washington, D.C. — The National Retail Federation (NRF) has urged Congress to pass the bipartisan Save American Workers Act, which would change the Affordable Care Act’s definition of full-time employment from 30 hours per week to 40 hours. NRF sent a letter to the House saying all votes related to the bill, H.R. 2575, would be considered key votes for the association’s annual scorecard.

The key vote letter follows testimony from NRF VP and employee benefits policy counsel Neil Trautwein before the House Ways and Means Committee in January, when he said the 30-hour definition is difficult for retailers because of the large number of employees who work variable hours. In addition to seeking a 40-hour definition for full-time workers, NRF has supported legislation that would limit the law to companies with 100 or more full-time workers rather than 50.

“The 40-hour full-time definition proposed in H.R. 2575 will return flexibility to employers,” French wrote. “We hope to continue to work to help mitigate the negative effects [the Affordable Care Act has] on the retail industry and retail employees.”

The Affordable Care Act’s employer mandate is set to go into effect in 2015 for employers with 100 or more full-time workers and 2016 for employers with 50 or more.

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