Ares Management has assumed a controlling stake in Guitar Center after converting a portion of its holdings in the company's debt into preferred stock. Bain Capital, which took Guitar Center private for about $2.1 billion in 2007, retained partial ownership and board representation in the company post-conversion.
Per the Ares transactions, Guitar Center has reduced its total debt by around $500 million, with annual cash interest expense dropping by over $70 million. The company has struggled recently with its debt load, which totaled $1.6 billion prior to the debt conversion, as well as an onslaught of competition from online retailers in particular. The debt conversion allowed Bain and Ares to keep the company out of bankruptcy court and retain certain tax breaks for the two firms.